Amply Finance
  • Introduction to Amply
    • What is Amply Finance?
    • Why Amply Finance?
    • How does Amply Finance Work?
  • Tokenomics
    • Tokenomics Details
    • preAMP Conversion Scheme
    • AMPLY Token Offering
  • Using Amply Finance
    • How to use Amply Finance
    • Supplying Tokens
    • Borrowing Assets
    • Repaying Loans
    • Withdrawing Assets
    • Claiming $AMPLY Rewards
    • Staking AMPLY
      • Withdrawing AMPLY
      • Upgrade AMPLY
      • Claim AMPLY rewards
    • Converting preAMP to AMPLY
    • Claiming vETH and vUSD Rewards
  • Efficiency Mode
    • Activating eMode
    • Using Collateral and Borrowing Tokens in eMode
    • Repaying Debt and Withdrawing Collateral in eMode
    • Deactivating eMode
  • Interest Rate Model
    • Borrow interest rate
    • Supply rate
  • Health Factor and Loan-to-Value Ratio (LTV)
  • Liquidations
    • Liquidation Simulator
  • Yield Opportunity
  • Yield Matrix
    • Using the Yield Matrix
  • Asset Listings and Risk Management
    • Asset Listing Criteria
    • Supported Assets and Parameters
  • Information
    • Smart Contract Addresses
    • Paymaster
    • Amply Finance Terminology
    • Contact Us
    • Brand Assets
    • Audits
    • Risk Disclosure
    • AMA Transcript
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  • How Liquidation Works:
  • Liquidation Penalty
  • Variable Close Factor
  • Reserve Factor

Liquidations

Liquidation is a critical mechanism in maintaining the health of Amply Finance. When a borrower's position becomes undercollateralized—meaning their health factor drops below 1—their loan is at risk of liquidation.

How Liquidation Works:

  • Undercollateralization: If a borrower's health factor falls below 1, their loan is flagged for liquidation.

  • Liquidation Call: Anyone can initiate a liquidation by making a liquidation call() to the Pool contract and repaying a portion or the entire loan in exchange for the borrower's collateral.

  • Liquidation Penalty: To incentivize liquidations and protect the protocol, liquidators receive a portion of the seized collateral as a liquidation bonus. By incentivizing liquidations, Amply Finance minimizes bad debt and maintains system stability.

Liquidation Penalty

A liquidation penalty is imposed on borrowers when their position is liquidated. This fee is a percentage of the liquidated collateral and serves two primary purposes:

  1. Incentivizing Liquidators: The majority of the penalty is distributed to the liquidator as a reward for their role in maintaining protocol health.

  2. Protocol Revenue: A portion of the penalty is allocated to the protocol's treasury.

Example:

If Ally borrows 80 vUSD against 100 vETH collateral (assuming both assets are valued at $1) and her position is liquidated, a liquidator who repays 40 vUSD of her debt would receive:

  • 40 zkUSD: The repaid debt amount.

  • A liquidation penalty (e.g., 5%) on the seized collateral (40 zkUSD * 0.05 = 2 zkUSD).

In total, the liquidator would receive 42 zkUSD.

Important Note:

The specific liquidation penalty percentage can vary based on the collateral asset and other protocol parameters.

Variable Close Factor

Close factor is defined as the maximum amount of debt a liquidator can repay per transaction. For example, a close factor of 50% means that a liquidator can pay off up to half a borrower’s loan at one go.

On Amply, this close factor is variable depending on a user’s Health Factor. Typically, a liquidator can repay up to 50% of a borrower's debt (close factor of 50%). However, a close factor of 100% will be applicable if HF < 0.95. This means that up to 100% of a borrower's debt can be liquidated if his health factor drops below 0.95.

Reserve Factor

Amply sets aside a Reserve Factor - a percentage of interest that is to be allocated to the ecosystem treasury. A riskier asset typically has a higher reserve factor

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Last updated 9 months ago