# Liquidation

Liquidation occurs when a position’s **Debt ratio** (Debt to Value Ratio) exceeds the maintenance threshold. At this point, liquidators can step in to close the position, ensuring that borrowed funds are repaid to lenders.

**Mighty Finance** implements an optimized liquidation system that balances capital efficiency with user protection.

## Liquidation Process

* When a **Debt ratio** surpasses the **Liquidation Threshold**, a **liquidation** is triggered to forcefully close the position.
* **Borrowed funds are repaid** to the lending pool.
* Any **remaining collateral** (after deducting a liquidation bounty) is **returned to the user**.
* The **liquidation process is time-sensitive** and depends on blockchain congestion.

## Liquidation Thresholds

The liquidation threshold varies based on **asset type** of selected LP and market conditions:

* **Stablecoin pairs**: **80% Debt Ratio**
* **General asset pairs**: **70% Debt Ratio**
* **High-risk assets**: Subject to governance updates

These parameters may be adjusted based on **market conditions** and **risk assessment models**.

## Liquidation Incentive

To encourage timely liquidations, **Mighty Finance** introduces Liquidiation Incentive of 7.5% to the total position value.

## Partial Liquidation Mechanism

For **low-liquidity pools** and **large positions**, Mighty Finance uses a **staged liquidation process**:

* **Initial liquidation covers 50% of the position**
* If the position remains above the liquidation threshold, **another 25% is liquidated**
* This process repeats until the position stabilizes or is fully closed

## Important Considerations

* **Liquidation is not instant.** Execution depends on **network congestion** and available liquidators.
* **Borrowers should actively monitor their positions** and **adjust leverage** accordingly.
* **Yield farming rewards and trading fees** are not factored into liquidation price calculations.

By combining **real-time risk monitoring**, **automated liquidation triggers**, and **optimized discount structures**, **Mighty Finance** ensures a **robust and fair** liquidation system for users and lenders alike.
