Health Factor & Liquidations | Aave ProductsResourcesDevelopersApp Interact with Aave easily. GHO The Aave-native stablecoin. Brand Assets, examples and guides. FAQ Answers to common questions. Help & Support Guides, articles and more. Governance The Aave Governance forum. Documentation Technical guides for developers. Security Audit reports and information. Bug Bounty Report responsibly and get rewarded. Open AppApp Interact with Aave easily. GHO The Aave-native stablecoin. Resources Brand Assets, examples and guides. FAQ Answers to common questions. Help & Support Guides, articles and more. Governance The Aave Governance forum. Developers Documentation Technical guides for developers. Security Audit reports and information. Bug Bounty Report responsibly and get rewarded. Borrowing GuidesHealth Factor & Liquidations advanced Health Factor The health factor is a critical metric within the Aave Protocol that measures the safety of a borrow position. It is calculated as: Health Factor = (Total Collateral Value * Weighted Average Liquidation Threshold) / Total Borrow Value This metric indicates the stability of a borrow position, with a health factor below 1 signaling the risk of liquidation. The liquidation threshold, set by Aave Governance for each collateral asset, determines the maximum percentage of value that can be borrowed against it. For example, if you supply $10,000 in ETH with an 80% liquidation threshold and borrow $6,000 in GHO, your health factor would be 1.333. Managing Health Factor Maintaining a health factor above 1 is crucial to avoid liquidation. Regular monitoring of this metric is essential, as it fluctuates with the value of both collateral and borrowed assets. To improve your health factor, you can either supply more collateral or repay part of your borrow position. The health factor is sensitive to market changes—if your collateral's value increases, so does your health factor; conversely, if it decreases, your health factor drops, heightening the risk of liquidation. There is no universally "safe" health factor, as this depends on the volatility and correlation of your assets. Generally, lower health factors may be acceptable for correlated assets, such as stablecoins or assets closely tied to ETH. Tools for Managing Health Factor (Use at your own risk): Simulate health factor changes: DeFi Simulator Auto-repay borrow position: DeFi Saver Liquidation Process A liquidation in the Aave Protocol occurs when a borrower's health factor falls below 1, indicating that their collateral no longer sufficiently covers the borrowed amount. This situation can happen when the value of the collateral decreases or the borrowed amount increases, pushing the position past the liquidation threshold. During a liquidation, up to 50% of the borrower's debt is repaid by the liquidator, with an equivalent value, plus a liquidation fee, taken from the borrower's collateral. Liquidations are permissionless, meaning any network participant can initiate the process when a borrow position is eligible for liquidation. Liquidations within Aave are highly competitive, requiring a deep understanding of the protocol and technical proficiency. Liquidators must actively monitor borrow positions, quickly react to changes in oracle prices, collateral balances, and protocol parameters, and submit transactions with high priority in the attempt to be first to execute the liquidation. Due to the competitive nature, successful liquidations often necessitate custom-coded bots or scripts that automate monitoring and execution. Developers interested in building liquidation bots or learning more about the process can find guidance and resources in the Aave Developer Documentation. Related Borrow Tokens beginner Maintain overcollateralised borrow positions. 3 min read Repay Tokens beginner Repay active borrow positions. 3 min read Efficiency Mode (E-mode) intermediate Borrowing in Efficiency Mode (E-mode). 3 min read Aave.com provides information and resources about the fundamentals of the decentralised non-custodial liquidity protocol called the Aave Protocol, comprised of open-source self-executing smart contracts that are deployed on various permissionless public blockchains, such as Ethereum (the "Aave Protocol" or the "Protocol"). Aave Labs does not control or operate any version of the Aave Protocol on any blockchain network. Resources Brand FAQ Help & Support Governance Developers Documentation Technical Paper Security Bug Bounty Company Privacy Policy Terms of Use Contact