Liquidations
Maintain a healthy collateral ratio to avoid liquidation.
NB: For users who have not borrowed or lowered their LTV since the removal of Recovery Mode, these terms do not apply. These users maintain their 90.9% LTV until they interact with their loan and agree to the new 80% LTV.
If a user's loan is liquidated at 90.9% LTV, then they will not receive any collateral in return, since the liquidation penalty is 10%.
Users can borrow up to 80% of the value of their multi-asset collateral. If a user’s borrowed USDH rises to a value above the loan-to-value (LTV) ratio of 80%, then their position can be liquidated.
When a user is liquidated, they lose 82.5% of their deposited collateral.
  • They keep their borrowed USDH
  • Receive 17.5% of their deposited assets
  • Debt is wiped clean to zero
Liquidations occur when any borrowing position reaches an 80% loan-to-value ratio (LTV). An 80% LTV means that the borrowed USDH is worth 80% of the deposited assets.
Every loan on Hubble can be viewed on the Leaderboard page. Loans above the 80% threshold can be liquidated via a liquidation bot, and Hubble will release an open-source bot that anyone can set up to help participate. The user who triggers the liquidation earns 0.5% of the liquidated account's collateral.
When a liquidation is triggered, the forfeited collateral assets are distributed to USDH Vault providers, and USDH from the USDH Vault is used to pay off the loan. This reduces the use of bots to facilitate liquidations, and it rewards USDH Vault providers with around ~10% in gained value as their USDH is burned in return for collateral. (More on this in the USDH Vault section).
Users will know they are liquidated when their position on the Loans page no longer reflects their deposit or USDH debt. When a user is liquidated, they forfeit 82.5% of their deposit and their debt is wiped clean.

Liquidation example:

First, a user takes a loan:
  • SOL/USD is $100.0
  • User Position (debt=100, collateral=2 SOL)
  • User LTV is: (100 / 200)*100 = 50% LTV
  • User is safe. Liquidation point is 80% LTV.
Then, SOL price drops:
  • SOL/USD is $80.0
  • User Position (debt=100, collateral=2 SOL)
  • User LTV is: (100 / 160)*100 = 62.5% LTV
  • User is safe. Liquidation point is 80% LTV.
Then, SOL price drops again:
  • SOL/USD is $62.0
  • UserPosition (debt=100, collateral=2 SOL)
  • User LTV is: (100 / 124)*100 = 80.6% LTV
  • User is fully liquidated (loses 82.5% of collateral), because liquidation point is below the user's LTV. In this case, the user loses 82.5% of their collateral, receives 17.5% of their assets back, and their debt is fully paid by the USDH Vault.
  • After liquidation: User Position (debt=0, collateral=0 SOL)
    • If the user has kept their 100 USDH, they incur a net loss of ~10% (Collateral $132 - Debt $100 - $23.1 assets returned = $8.9 loss).

How to avoid getting liquidated:

Maintain a healthy LTV to prevent the possibility of being liquidated. Users can do this by depositing additional collateral to their loans or repaying some of their borrowed USDH.
Every user has a different approach to taking risks, and users should ask themselves some questions to assess how much risk they would like to take when borrowing:
  • How much time do you have to consistently watch market prices and improve your LTV?
  • Can you easily access your computer, the internet, your wallet, Hubble, and Solana if you need to improve your position in a short amount of time?
  • What resources do you have to deposit additional collateral, if necessary? Can you easily access those resources?
  • Can you easily repay some of your USDH loan, if necessary? Have you deposited USDH somewhere else, and is it easy to get it back? Have you swapped USDH into other tokens?
If users don't have time to continuously maintain your account, then it's a good idea to start off with a lower LTV in case of extreme drops in collateral value.
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