📋Liquidation Case Study
Two full numerical liquidation scenarios
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Two full numerical liquidation scenarios
Both triggers of liquidation, worked end-to-end. Current threshold and fee values: Protocol Parameters (this page uses 80% threshold, 50% liquidation amount, 7% fee).
Setup: Alice deposits 10 ETH at $2,000/ETH ($20,000) and borrows 12,000 USDC.
Entry
$20,000
$12,000
60%
ETH → $1,600
$16,000
$12,000
75%
ETH → $1,500
$15,000
$12,000
80% → liquidatable
Liquidation:
Liquidator repays 6,000 USDC (50% of debt)
Collateral seized: 6,000 × 1.07 / $1,500 = 4.28 ETH ($6,420)
Alice's remaining position: 5.72 ETH ($8,580) collateral, 6,000 USDC debt
Post-liquidation LTV: 6,000 / 8,580 ≈ 70%
Liquidation can also strike when the debt appreciates, even if your collateral is a stablecoin.
Setup: Charlie deposits 1,000,000 USDC and borrows 10 BTC at $60,000/BTC ($600,000 debt).
Entry
$1,000,000
$600,000
60%
BTC → $75,000
$1,000,000
$750,000
75%
BTC → $80,000
$1,000,000
$800,000
80% → liquidatable
Liquidation:
Liquidator repays 5 BTC ($400,000 — 50% of debt)
Collateral seized: $400,000 × 1.07 = $428,000 USDC
Charlie's remaining position: $572,000 USDC collateral, 5 BTC ($400,000) debt
Post-liquidation LTV: 400,000 / 572,000 ≈ 70%
Watch both sides: collateral falling and debt rallying raise LTV. Borrowing a volatile asset against stablecoins is not a "safe" configuration.
Usually partial — not always: at the 80% threshold, liquidation takes 50% of debt and the corresponding collateral + fee, and the position survives at a safer LTV. If LTV deteriorates past the full-liquidation threshold (≈ 85% — Protocol Parameters), the entire debt is liquidated in one call. Don't treat the 50% figure as your worst case.
The fee is avoidable: adding collateral or unwinding early costs far less than the 7% liquidation fee.
Liquidation — mechanism overview
ZC Bonds as Collateral — liquidation specifics for ZC collateral
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