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Liquidation

This page will give you a better understanding of liquidations at WENWEN Protocol.
To ensure the soundness of the entire stablecoin supply, every WEN borrowed is fully backed by collateral assets. A position will be liquidated if the value of its collateral asset price falls to the liquidation price.

Liquidation Process

Once the position's collateral asset price falls to the liquidation price, the liquidation process will be triggered. During the liquidation process, a liquidator will execute the liquidation by paying the amount of WEN debt in exchange for the ownership of the equivalent value of the collateral asset. 10% of the liquidation fee and accrued interest fee will be collected and later distributed to sSHAREN holders. The borrower of this liquidated position keeps the amount of WEN borrowed. However, the borrower loses the amount of collateral asset deposited. Therefore, it is crucial for borrowers to maintain their positions above the liquidation price.
Remember, it is borrowers’ responsibility to manage their position above the liquidation price to avoid liquidation.

Liquidators

Anybody can liquidate a position as soon as it drops to the liquidation price. Liquidators can choose to repay the WEN debt. In return, the liquidators will receive the equivalent amount of collateral assets deposited in this position. One liquidator can liquidate multiple positions at the same time if they fall to the liquidation prices.

Liquidation Fee

The liquidation fee is the incentive fee given to the liquidators performing liquidation. From the borrower's perspective, the liquidation fee is already included in the calculations when quoting a liquidation price for the respective collateral assets. When the borrower's liquidation price is reached, the position will be liquidated. From the liquidator's perspective, the liquidation fee is the discount a liquidator gets when buying collateral flagged for liquidation.
Liquidation fee will be collected and distributed:
  • 90% of the liquidation fee will be distributed to the liquidator
  • 8% of the liquidation fee will be distributed to sSHARE holders, and 2% will be distributed to the reserve as the backstop.

Liquidation Price

The liquidation price is the price of the collateral asset that will trigger the liquidation. When the price of the collateral asset drops to the liquidation price, the position will be liquidated. A position will only be liquidated when it drops to the liquidation price, borrowers need to maintain their position collateral price above the liquidation price to avoid liquidation.