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Liquidation and Redeem
The Bend Protocol utilizes a scored 'health factor' for loans. The formula is outlined below.
When the 'health factor' of an NFT loan is below 1, anyone can trigger a liquidation in terms of an NFT Auction. The liquidator is called Bidder on BendDAO. The bidder will pay back all of the debt and receive the collateralized NFT in return. The borrower can redeem his NFT to exit auction by repaying some loan debts (50% in default).
The definition for Health Factor: (Floor Price * Liquidation Threshold) / Debt with Interests.
The risk level of the health factor:
- 0.0 < HF < 1.0: Dangerous, borrower maybe lose collateral if the debt is not repaid timely.
- 1.0 <= HF <= 1.5: Risky, borrower should repay partly the debt timely.
- 1.5 < HF < 2.0: Careful, borrower should pay attention and monitor the debt timely.
- 2.0 <= HF: Safe, borrower no need to worry and keep the debt last.
Liquidation will be triggered if the NFT loan's health factor is below 1.