Liquidation

On XOXNO, the health factor is the key indicator of your borrow position’s safety. It shows how well your collateral supports your borrowed amount.

• A higher health factor indicates a safer position.

• A lower health factor signals increased risk of liquidation.

---

Liquidation: What Happens When Health Factor Drops Too Low?

• Liquidation occurs when your health factor drops below the required level, meaning your collateral no longer sufficiently supports your borrowings.

• Causes of health factor decline:

  • Decrease in collateral value.

  • Increase in borrowed amount.

• During Liquidation:

  1. A portion of your collateral is used to repay your loan.

  2. A liquidator (a network participant) repays part of your debt on your behalf.

  3. In return, the liquidator receives:

     • A portion of your collateral.

     • A liquidation fee for their service.

  4. This process ensures the stability of XOXNO, even in volatile market conditions.

---

Dynamic Nature of the Health Factor

• Your health factor isn’t fixed—it adjusts based on:

  • Collateral value: If it rises, your health factor improves, reducing risk.

  • Borrowed amount: If you borrow more or your collateral value drops, your health factor weakens, increasing liquidation risk.

---

How to Manage and Improve Your Health Factor

1. Increase Your Collateral:

   • Adding more collateral strengthens your position, raising your health factor.

2. Repay Borrowed Assets:

   • Reducing your debt lowers your risk and improves your health factor.

3. Monitor Market Movements:

   • Asset prices fluctuate, so keep an eye on the value of your collateral to avoid surprises.

4. Review and Adjust Regularly:

   • Proactively manage your borrow position to stay in control and avoid liquidation risks.

---

Why Managing Your Health Factor Matters

• A well-maintained health factor ensures:

  • Safety of your borrow position.

  • Avoidance of liquidation events that can result in collateral loss.

  • Stability of your overall DeFi strategy.

By taking a proactive approach—monitoring collateral, repaying debt, and adapting to market conditions—you can maintain a strong health factor and maximize the benefits of borrowing on XOXNO.