Liquidation Rules of Leveraged Yield Farming
Glossary
Kill Factor: Maximum debt ratio, beyond which anyone can liquidate the position.
Debt Ratio: Debt value as a percentage of the total position value.
Formula: Debt Ratio = loan value / position value (in loan token) *100%
Risk Ratio: Ratio of debt ratio to kill factor.
Formula: Risk Ratio = debt ratio / liquidation coefficient * 100%
Liquidation Rules
In the event that your debt ratio has gone above the Kill Factor, that is to say, when the risk ratio of the position reaches 100%, your position will be liquidated.
The liquidation mechanism adopts DEX+CEX double price verification, liquidation will executed only when the error is within 5%.
Two price verifications (with an interval of 1 minute), to prevent attackers from profiting by price manipulation in the same block through flash loan.
The H2O Finance participates in position liquidation, and liquidation is not executed by bounty hunter, to prevent attackers from obtaining liquidation benefits through flash loan.
The value you receive back after liquidation will depend on the Kill Factor. Please refer to the table below for an estimate.
Calculation formula:
Value return to Farmer = (Position value - Debt value (include interest) - Liquidation fee)
DEX | Pairs | Leverage | Debt Ratio | Kill Factor |
MDEX | USDT/BNB | 3 | 66.67% | 83.33% |
PancakeSwap | USDT/BNB | 3 | 66.67% | 83.33% |
MDEX | USDT/BUSD | 9 | 88.89% | 94% |
PancakeSwap | USDT/BUSD | 9 | 88.89% | 94% |
MDEX | BUSD/BNB | 3 | 66.67% | 83.33% |
PancakeSwap | BUSD/BNB | 3 | 66.67% | 83.33% |
PancakeSwap | BTCB/BUSD | 3 | 66.67% | 83.33% |
MDEX | ETH/BNB | 3 | 66.67% | 83.33% |
PancakeSwap | ETH/BNB | 3 | 66.67% | 83.33% |
MDEX | BTCB/BNB | 3 | 66.67% | 83.33% |
PancakeSwap | BTCB/BNB | 3 | 66.67% | 83.33% |
MDEX | MDX/BNB | 3 | 66.67% | 83.33% |
PancakeSwap | CAKE/BNB | 3 | 66.67% | 83.33% |
MDEX | BTCB/USDT | 3 | 66.67% | 83.33% |
MDEX | ETH/USDT | 3 | 66.67% | 83.33% |
MDEX | DOT/USDT | 2 | 50% | 67.50% |
MDEX | FIL/USDT | 3 | 66.67% | 83.33% |
MDEX | ADA/USDT | 2 | 50% | 67.50% |
MDEX | LTC/USDT | 3 | 66.67% | 83.33% |
MDEX | CAKE/BNB | 3 | 66.67% | 83.33% |
MDEX | MDX/BUSD | 3 | 66.67% | 83.33% |
PancakeSwap | LINK/BNB | 3 | 66.67% | 83.33% |
PancakeSwap | XVS/BNB | 3 | 66.67% | 83.33% |
PancakeSwap | DOT/BNB | 3 | 66.67% | 83.33% |
PancakeSwap | ADA/BNB | 3 | 66.67% | 83.33% |
PancakeSwap | UNI/BNB | 3 | 66.67% | 83.33% |
PancakeSwap | CAKE/BUSD | 3 | 66.67% | 83.33% |
PancakeSwap | DAI/BUSD | 4 | 75% | 90% |
PancakeSwap | USDC/BUSD | 9 | 88.89% | 94% |
PancakeSwap | USDC/USDT | 9 | 88.89% | 94% |
Security measures
a. Authoritative audit
Security has always been the top priority of H2O Finance team since the project started, and 3 overall audits have been fulfilled by the three world class audit institutions, CertiK, ChainsGuard and PeckShield. PeckShield has also completed the audit report of margin trading products separately.
b. All the smart contracts related to users' assets are time-locked
Timelock is a contract for delaying changes to the protocol. This contract is an owner of all the major contracts in H2O Finance. This is a security feature that enables the community to see any upcoming updates and prepare in advance for them. If anything looks suspicious, they can pull their funds from the protocol before the update takes effect.
c. Safety measures that avoid flash loan attack comprehensively
Contracts of H2O Finance open to EOA (Externally Owned Accounts) only, which evades potential risks that attackers open a position to borrow massively for flash loan attack.
H2O Finance liquidates leveraged positions through liquidation bot instead of bounty hunter like some other projects. The design will be able to cut the profit source of the attacks.
The maximum limit of positions in H2O Finance is more strict than other products, which avoids sharp fluctuation of token price caused by opening a large position. The maximum value of each position is strictly calculated according to the risk management algorithm and is highly relevant to liquidity of the trading pair, which avoids attackers manipulating prices.
The "Gemini Liquidation System" ensure accurate and safe liquidation
The liquidation strategy of some other products is, the oracle feed price and record it on the oracle contract, the price from oracle contract determine the liquidation price. But this liquidation strategy is not good enough, we have seen too many cases, in which users suffer from capital loss caused by Oracle failing to provide the correct price.
H2O Finance invented the Gemini Liquidation System based on the liquidation strategy of other products, The specific rules are as follows:
the oracle read and compare price from both DEX and CEX in a 1 minute time interval, when a position qualified to get liquidating for the first time, and the price difference from CEX and DEX is within 5%, then it will be listed in a liquidating waiting list, it will be liquidated only if the next price verification from oracle also proves this position is qualified for liquidation. The price verification from CEX is also double checked, the price is acquired from both Huobi and Binance, in this way, from which thoroughly avoids capital loss of users due to price verification not in time and inaccuracy.
For more security and liquidation parameter details, please pay attention to the follow-up announcements.
Last updated