Health Factor
A metric showing how close a lending position is to liquidation, where below 1 means liquidatable.
In-Depth Explanation
Health Factor = (Collateral Value × Liquidation Threshold) / Debt Value. A health factor of 2 means collateral could lose 50% before liquidation. Below 1 triggers liquidation. DeFi users monitor health factor and may need to add collateral or repay debt as prices move.
Related Terms
Liquidation
Forced closure of an undercollateralized position, typically with a penalty to the borrower.
Collateral
Assets deposited as security for a loan, which can be seized if the borrower fails to repay.
Loan-to-Value Ratio
LTVThe ratio of borrowed amount to collateral value, determining how much you can borrow against your deposits.
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