Liquidation

Borrow limit

The Borrow Limit represents the maximum percentage of the total amount you can borrow, determined by the value of the collateral you have deposited and the available liquidity. As liquidation will happen as the user’s borrowed position exceeds the borrowing limit (when borrow utilization is > 100%),

Borrow limit = borrow utilization at 100%

On JAX, the Borrow Limit is set at a maximum of 95% to prevent liquidation events.

Borrow Utilization

Under the Dashboard section, you'll find a "Borrow Utilization" bar, providing a visual representation of your account's health. Essentially, it illustrates how close your position is to the liquidation threshold. Keeping a close eye on this bar helps users maintain a healthy borrowing position within the JAX Finance platform.

The lower the % of utilization, the safer the user’s collateral is.

• Borrow utilization between 0-65%: Green (No or low risk)

• Borrow utilization between 65% to 95%: Orange (Medium to high risk, requiring closer attention to positions)

• Borrow utilization > 95%: Red (Danger! High risk of liquidation)

Improving Borrow Utilization

To improve Borrow Utilization, the user can:

• Repay a portion or the full amount of the borrowed amount

• Add more collateral

Liquidation

Liquidation happens when a borrower’s borrowed asset amount crosses the “borrow limit”, signifying collaterals are not fully covering the borrowed amount as per collateral factors. In a liquidation event, the liquidators will seize the available collateral from accounts that cross the liquidation threshold and execute market transactions to help repay the borrower’s debt, taking a fee from the process.

Liquidators are bots run by external third parties, helping to maintain the collateral health in JAX. Please refer to Close Factor and Liquidation Incentive for more information on fees.