Liquidations

When a borrower’s health crosses liquidationThresholdPct, their position becomes liquidatable. klend exposes a set of curator-tunable parameters governing how aggressively liquidations happen and how much liquidators earn for clearing positions. This page covers the market-level and reserve-level fields that shape liquidator behavior. For threshold setting and IR curve choices, see Risk parameters. For the auto-deleverage (margin call) mechanism, see Auto-deleverage.

The liquidation flow at a glance

When a borrower’s LTV crosses liquidationThresholdPct, the position becomes liquidatable. Any wallet can call liquidate-obligation-and-redeem-reserve-collateral against it. In a single instruction, the liquidator repays up to close_factor × debt, seizes collateral of equal value plus the configured bonus, and the obligation is restored at or above the liquidation threshold. Liquidations are permissionless: the program holds the safety net, an open market of liquidators races to act on it.

Close factor and value caps (market-level)

Tunables on LendingMarket:

{
  "liquidation_max_debt_close_factor_pct": 25,
  "max_liquidatable_debt_market_value_at_once": "<u64>",
  "min_full_liquidation_value_threshold": "<u64>",
  "min_value_skip_liquidation_ltv_checks": "<u64>",
  "min_value_skip_liquidation_bf_checks": "<u64>"
}

Field	What it does
`liquidation_max_debt_close_factor_pct`	Maximum portion of debt a liquidator can repay in a single liquidation, in percent. Default `25` means a borrower’s position can be liquidated by 25% per round. Lower values protect borrowers from one-shot wipeout; higher values let liquidators clear damaged positions faster
`max_liquidatable_debt_market_value_at_once`	Hard ceiling on market-value liquidated per liquidation (in the market’s quote currency, scaled). Throttles whale liquidations to prevent a single liquidator from clearing too much at once
`min_full_liquidation_value_threshold`	Below this debt market value, the close-factor cap is bypassed and the entire position can be liquidated. Used to cleanly clear dust positions where partial liquidation is uneconomical
`min_value_skip_liquidation_ltv_checks`	Below this market value, the program skips the LTV health check during liquidation. Allows a liquidator to clear a dust position regardless of whether it’s underwater on standard checks
`min_value_skip_liquidation_bf_checks`	Same idea for the borrow-factor check

Tuning the close factor

Default close factor of 25% is sized so a borrower has multiple rounds to add collateral or repay before being fully wiped out. Each liquidation round drives the position back toward health; if the market continues moving against them, subsequent rounds re-engage. Reasons to deviate:

Setting	Use case
`15-25%`	Default. Borrower-protective
`30-50%`	Faster cleanup of unhealthy positions; appropriate for high-volatility assets where multi-round liquidation creates more risk than it prevents
`100%`	Single-round full liquidation. Use only for fixed-term reserves at maturity, or in incident response

Liquidation bonus (reserve-level)

Liquidator incentive lives on each reserve:

{
  "minLiquidationBonusBps": 500,
  "maxLiquidationBonusBps": 1000,
  "badDebtLiquidationBonusBps": 99,
  "protocolLiquidationFeePct": 0
}

Field	What it does
`minLiquidationBonusBps`	Floor on the bonus a liquidator earns. The actual bonus scales with how unhealthy the position is, but cannot drop below this
`maxLiquidationBonusBps`	Cap on the bonus, no matter how unhealthy. Prevents over-liquidation when prices gap
`badDebtLiquidationBonusBps`	Bonus applied when the position is in bad debt (debt exceeds collateral value). Higher than normal to incentivize clearing the unrecoverable position
`protocolLiquidationFeePct`	Percentage (0–100) of liquidation proceeds that route to protocol fees; the liquidator receives the remainder

Reference values:

Asset class	min	max	bad debt
Stablecoins (in eMode)	100 (1%)	200 (2%)	99 (≈1%)
Major liquid (SOL, BTC, ETH)	300–500 (3–5%)	700–1000 (7–10%)	99
Long-tail	500–800	1500–2500	99

The actual on-chain bonus interpolates between min and max based on how far underwater the position is.

Pausing liquidations

{
  "price_triggered_liquidation_disabled": 0
}

Value	Effect
`0`	Default. Liquidations triggered by price movement are allowed
`1`	All price-triggered liquidations are blocked. Use during oracle incidents to prevent cascading liquidations on bad prices

This is a market-level kill switch. Combine with borrow_disabled for full incident-mode posture. See Emergency controls.

Liquidations on mature fixed-term debt

{
  "mature_reserve_debt_liquidation_enabled": 1,
  "obligation_borrow_debt_term_liquidation_enabled": 1,
  "term_based_full_liquidation_duration_secs": 0
}

These flags govern liquidation of fixed-term positions. See Fixed rate reserves for details.

Bad debt and socialized loss

If a position can’t be liquidated cleanly — collateral falls below debt and even the bad-debt bonus doesn’t cover the gap — the curator (or emergency_council) can call socialize-loss to spread the loss across the affected reserve’s depositors. This is an irreversible, depositor-affecting action. Use it only when:

The position is genuinely unrecoverable
All standard liquidation paths have been exhausted
The affected reserve has a credible loss-recovery plan (insurance, treasury backfill, etc.)

socialize-loss is callable by the lending_market_owner or, if configured, the emergency_council. See Emergency controls.

Reference

Reserve config reference — every reserve-level liquidation field
Market config reference — every market-level liquidation field
Risk parameters — choosing LTV, threshold, IR curve
Auto-deleverage — margin-call grace window (advanced)
Emergency controls — pausing the market, socialize-loss

Get started

Market setup

Reserve setup

Optional features

Day-2 operations

Data & integration

Reference

The liquidation flow at a glance

Close factor and value caps (market-level)

Tuning the close factor

Liquidation bonus (reserve-level)

Pausing liquidations

Liquidations on mature fixed-term debt

Bad debt and socialized loss

Reference

​The liquidation flow at a glance

​Close factor and value caps (market-level)

​Tuning the close factor

​Liquidation bonus (reserve-level)

​Pausing liquidations

​Liquidations on mature fixed-term debt

​Bad debt and socialized loss

​Reference

The liquidation flow at a glance

Close factor and value caps (market-level)

Tuning the close factor

Liquidation bonus (reserve-level)

Pausing liquidations

Liquidations on mature fixed-term debt

Bad debt and socialized loss

Reference