Health Factor
Leveros inherits its liquidation mechanism from Morpho Markets, as it is built directly on top of Morpho’s infrastructure. This ensures that the liquidation process in Leveros is robust, protecting both lenders and the overall system from risks associated with defaults.
In Leveros, when a borrower’s position becomes unhealthy, meaning the Loan-To-Value (LTV) ratio exceeds the market’s predefined Liquidation Loan-To-Value (LLTV), the account can be liquidated. This ensures that the platform remains solvent and that lenders’ capital is protected.
How Liquidation Works in Leveros and Morpho:
Health Factor Check: When a borrower’s LTV exceeds the allowed threshold (LLTV), the position is considered at risk of liquidation.
Liquidation Trigger: Any user can trigger the liquidation of an unhealthy account by repaying part of the borrower’s debt. In return, the liquidator receives an equivalent amount of the borrower’s collateral, along with an additional liquidation incentive as compensation.
Repayment and Collateral Transfer: Once the liquidation process is initiated, the liquidator repays the debt on behalf of the borrower and, in exchange, receives the corresponding value in the borrower’s collateral. This ensures that the borrower’s debt is reduced while the system remains balanced.
Borrower Options to Avoid Liquidation:
Borrowers can monitor their LTV ratio in real time. If their position is approaching liquidation, they can either:
Repay part or all of their loan to bring their LTV back below the LLTV threshold.
Add more collateral to their position, improving their LTV ratio and avoiding liquidation.
Integration with Morpho Markets:
Since Leveros is built on top of Morpho Markets, the entire liquidation mechanism—including position health tracking, debt repayment, and collateral transfer—is managed by Morpho’s infrastructure. This guarantees an efficient and secure process, benefiting from the battle-tested mechanics already implemented in Morpho.
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