The liquidation process is triggered when a borrower's Health Factor falls to 1 or lower, indicating that the value of their collateral may not be enough to cover their debt, posing risks to the lenders and zkLend protocol. The liquidation process incentivises external party(ies) to actively monitor zkLend's loan portfolios to seek out borrowings that have Health Factor below 1 and to actively repay these loans to ensure liquidity safety and health of the protocol.
Liquidators can initiate a
liquidationCall()to pay back portion of the debt and receive a Liquidation Bonus. Liquidation Bonus is an additional % of collateral liquidator shall entitle to receive for repaying the debt, calculated on pro-rata basis based on the amount of debt repaid.
Liquidations are run permissionlessly and anyone can become a Liquidator. Liquidators must repay no more than the amount to bring the user's Health Factor back up to 1. In return, the liquidator will receive associated amount of the collateral at a discount (known as the Liquidation Bonus).