# Liquidation

**Borrow Limit** is the maximum amount that a user can borrow based on the value of their deposited collateral and the available liquidity. It is calculated based on the user's Borrow Utilization, which represents the proportion of the total deposited collateral against the total value of the borrowed assets. When the user's Borrow Utilization reaches 100%, a liquidation event occurs, and the user's borrowed position exceeds the Borrow Limit.

To help users assess their risk of liquidation, Borrow Utilization is presented as a percentage. Borrow Utilization percentages of less than 75% are relatively safe, while Borrow Utilization between 75% to 90% requires closer attention to the user's positions. When Borrow Utilization is between 90% to 95%, the user should improve their Borrow Utilization to avoid liquidation. Borrow Utilization exceeding 95% is considered high risk.

Liquidation occurs when a borrower's borrowed asset amount surpasses the Borrow Limit, indicating that the collateral provided does not cover the borrowed amount. This may happen due to changes in the value of the borrowed or supplied asset, and users should remain vigilant in anticipating market fluctuations. In a liquidation event, liquidators seize the available collateral from accounts that cross the Liquidation Threshold and execute market transactions to repay the borrower's debt, taking a fee in the process.

**Collateral Ratio** is the percentage of an asset that can be treated as collateral. Stablecoins usually have higher collateral ratios, such as 85%, while more volatile assets like BTC have lower collateral ratios, such as 75%. A user can borrow up to the product of an asset's value and its collateral ratio.

**Liquidation Threshold** is slightly higher than an asset's collateral ratio. If a user's borrows exceed the sum of the product of each deposited asset's price and liquidation threshold, then they become eligible for liquidation.
