Liquity is a decentralized borrowing protocol that offers unprecedented benefits for borrowers.
To ensure that the entire stablecoin supply remains fully backed by collateral, Troves that fall under the minimum collateral ratio of 110% will be closed (liquidated).
The debt of the Trove is canceled and absorbed by the Stability Pool and its collateral distributed among Stability Providers.
Liquidations ensure that borrowing protocols remain solvent. Thus, Liquity’s quick and efficient liquidations of Troves that fall under the minimum collateral ratio of 110% maintain the health and stability of the protocol.
Liquidation is performed in the following order of priority:
Liquidators are incentivized to execute prompt liquidations while stability providers benefit from contributing to the system’s Stability Pool.