Liquidation Ratio
Liquidations take place if the health ratio drops below 200%, or if no repayment is made after the stake matures.
TLDR: $HEX1 is backed by T-shares, that are backed by HEX. The dollar value of HEX fluctuates, which means there is a chance the collateral value goes below the initially deposited value. If that happens, you are in risk of liquidation. Never let the health ratio go below 200%
HEX fluctuates. A lot.
T-shares are future HEX payments and they become harder and harder to mint, as time goes by as less HEX is available. Not only that, but T-Shares adjust to the number of participants, which means the more depositors, the harder it is to acquire a full T-share.
Hex One depositors are protected against liquidations before T-shares maturity. While T-shares cannot be sold before maturity, once they turn into HEX, there is a chance, while small, that liquidations take place. Beware of volatility.
Liquidation Ratio?
Once the health ratio, or collateral ratio, goes below 200%, liquidations may be triggered for that position.
How Liquidations work?
The process follows a Dutch auction where the discount is greater the more HEX price drops. Additionally, if the collateral ratio drops below 100%, the liquidator may only repay the HEX1 value that corresponds to the present collateral USD value. In other words, if the health ratio is at 50%, this means the liquidator pays only 50% of the total borrowed HEX1 to claim the position.
Liquidations may also happen if the borrower does not repay his HEX1 debt after the stake matures and the 7-day grace period is due. In that case, positions go to liquidation and follow the same process described above.
Liquidations happen on a first-come-first-served basis.
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