Liquidation

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The Convergent protocol relies on the Pyth JITOSOL:USD price feed for accurate collateral valuation and facilitates USV borrowing and liquidation mechanism. When a Position falls below a minimum collateralization ratio of 110%, it is considered under-collateralized, and is vulnerable to liquidation.

Trigger of liquidation

To guarantee that the entirety of outstanding USV supply is backed by collateral, any Position that falls under the 110% minimum collateral ratio will be closed, i.e. liquidated. The Nexus will absorb the debt and its collateral will be distributed among all Nexus Deposit users on a pro-rata basis.

Implication of liquidation

The full amount of USV borrowed is still retained by the owner of the Position, but they experience an overall loss of approximately 10% in value. Therefore, it is vital to maintain a ratio above 110%, preferably above 150%.