Liquidations

What is Liquidation

When you open a leveraged position, the margin you add on Asgard acts as the collateral. This collateral has to maintain its price relative to the borrowed asset or the underlying lending protocol may close your position to pay back the pool. This process is called Liquidation.

Liquidation occurs automatically on the underlying lending protocols, protecting both the individual user and the lending protocol where the position was opened.

Asgard has built-in measures to watch the underlying protocols like a hawk to prevent bad debt situations. This makes sure that when you open a position with us, you typically do not have to worry about liquidation.

Liquidation Process

To provide a robust and efficient liquidation, Asgard does three things:

  1. Allows you to set up Alerts via the Telegram WatchBot — giving you margin call notifications directly to your devices (currently live for MarginFi positions).

  2. If a position enters liquidation, Asgard leverages existing liquidators (70+) across lending protocols.

  3. To increase the robustness, efficiency and reliability of this process, We also run our own in-house Multi-Market HPC Liquidator Bot.

    1. This bot works in tandem with the existing liquidators, ensuring that liquidations are carried out smoothly and without disruption, further maintaining the stability of the platform.

Liquidation Penalties

  • The liquidation penalty is applied when liquidators purchase collateral during the liquidation process.

  • The liquidation penalty varies depending on which lending protocol the position is using.

    • Marginfi, Kamino, and Solend each have their own liquidation penalty structures.

    • These penalties are set by the respective protocols and may differ in amount and calculation method.

  • The penalty fee is deducted from the price of the liquidated collateral.

  • If Asgard's liquidator bot executes the liquidation first, the protocol earns this liquidation fee.

Avoiding Liquidation

Here are a few things you can do to avoid liquidation:

  • Monitor your Liquidation Ratio: Liquidation Ratio in your Dashboard tells you how close you are to being liquidated. Once it reaches zero, you can be liquidated.

  • Farm less volatile asset pairs: If you farm closely related assets like stablecoins, or SOL and SOL derivatives, liquidation becomes extremely unlikely.

  • Set up Alerts on Asgard WatchBot: Receive timely updates on your positions directly to your Telegram App. Alerts are currently live for all MarginFi positions.

  • Add collateral (coming soon)

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