Helio Protocol will be using the Collateral Auction mechanism as the liquidation model. Example of liquidation process below.
To limit the risk of liquidation, users are recommended to:
Borrow with caution and borrow under suggested liquidation ratio (~66%).
Periodically monitor borrowed position & account balance, to either repay back the loan or deposit more collateral.
Subscribe to Helio Protocol’s Liquidation Alert System (LAS).
Last updated
Variable/Step
Value/Formula
Price of 1 unit of collateral
$2
Liquidation ratio
66%
Collateral price based on liquidation ratio
$1.32
Assume User deposit 10 units collateral
10*2 = $20
Borrow limit
user_deposit * liquidation_ratio = 20 * 0.66 = $13.2
Assume User borrows $13.2 of HAY
13.2 $HAY
Assume Price of 1 unit of collateral decreases to
$1.8
Collateral unit price with safety margin
current_collateral_unit_price * liquidation_ratio = 1.8 * 0.66 = $1.188
Current worth of collateral with safety margin
price_of_colatteral * amount_of_collateral
= 1.188 * 10 = $11.88
Positive diff puts user under liquidation line
borrowed_amount - current_total_colateral_borrow_limit
= 13.2 - 11.88 = $1.32
Amount of collateral that goes to Dutch auction
10
Liquidation penalty (fixed by Helio governance)
13% of Debt
Debt to cover in the auction
borrowed amount * liquidation penalty = 13.2 * 1.13 = $14.916
Buf (percentage similar to liquidation penalty, fixed by Helio governance)
2%
Starting auction price (top)
current_collaterral_unit_price * buf = 1.8 * 1.02 = $1.836
Somebody triggers auction and gets tip + chip as a reward for doing it
Auction starts and the price gradually decreases. Liquidator can participate to buy customized amount of liquidated collateral
Tau (time until price is 0; fixed by Helio governance))
e.g. 3600
Dur (fixed by Helio governance)
time in seconds elapsed since the auction start, e.g. 600
Linear decrease of price (subject to be disrupted at the below event)
top * ((tau - dur) / tau) = 1.836 * ((3600 - 600) / 3600) = $1.53
Pause auction because of one of two conditions:
— tail (specific amount of time elapsed; fixed by Helio governance)
OR
— cusp (% of price drop; 40% start auction price; fixed by Helio governance)
Either requirement is met, the auction will be restarted
Wait till someone restarts auction
Tip (flat fee; fixed by Helio governance))
$300
Chip (dynamic fee; fixed by Helio governance))
0.1% of amount of debt in the auction
Restarter gets tip + chip as a reward
