Borrow Limit represents your percentage of the maximum amount you can borrow, based on the value you have deposited as collateral and the available liquidity. Borrow limit = borrow utilisation at 100%.
As liquidation will happen as user’s borrowed position exceeds the borrow limit (when borrow utilisation is > 100%),
Borrow utilisation serves as a visual indication of the proportion of total deposited collateral against the total value of borrowed assets, in other words, how close is the position to being liquidated.
The lower the % of utilisation, the safer the user’s collateral is.
Borrow utilisation < 75%: Green (Relatively safe)
Borrow utilisation between 75% to 90%: Orange (Please pay closer attention to positions)
Borrow utilisation between 90% to 95%: Red (Please improve borrow utilisation)
Borrow utilisation > 95%: High risk of liquidation
To improve Borrow Utilisation, the user can:
- Repay a portion or the full amount of the borrowed amount
- Add more collateral
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 crosses the liquidation threshold and execute market transaction 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 Aurigami. Please refer to Close Factor and Liquidation Incentive for more information on fees.