What is a liquidation?

A liquidation is essentially when the total value of the position or collateral in a loan goes below how much the lender provided when the loan was formed. Liquidations in SandCastle are instant and complete to limit the potential for bad debt.

Within SandCastle a liquidation can occur for both Uniswap V3 positions and regular loans.

Uniswap V3 Position

When a leveraged Uniswap V3 position is liquidated, all of the funds in the position are converted to the provided token via an approved route. Then, if that total amount of value passes below a threshold defined by the total value of provided tokens + a buffer + a fee, then the user is liquidated.

Regular Loans

When a regular loan is liquidated, the collateral is converted to the provided token. If this amount is less than the threshold defined by the total value of the provided tokens + a buffer + a fee, then the user is liquidated.