Once a position crosses Liquidation LTV, liquidation can occur at any time. There is no grace period — liquidation bots operate continuously.
What triggers liquidation
A position becomes eligible for liquidation when Current LTV exceeds Liquidation LTV. LTV is calculated using risk-adjusted debt values:
Current LTV = risk-adjusted debt value / collateral value
Partial liquidations
Kamino does not liquidate entire positions in a single event. A close factor of 10% is applied per liquidation event, reducing the position by a fixed portion each round. If the position remains above Liquidation LTV after the first round, another is applied. This iterative structure protects borrowers who briefly breach the threshold: a small overshoot results in a proportionally small liquidation, not full position closure. A borrower who adds collateral or repays debt between rounds can stop the process entirely.
Dynamic liquidation penalties
Liquidators are compensated with a bonus paid in collateral. The penalty scales with how long the position remains unhealthy:
| Timing | Penalty |
|---|
| Immediate liquidation | 0.1% |
| Delayed liquidation | 0.1% → 10% (scales up) |
| Maximum penalty | 10% |
Who can liquidate
Liquidations on Kamino Borrow are permissionless. Any actor can call the liquidation instruction on an unhealthy position and earn the penalty. In practice, automated bots monitor all open positions continuously and execute the moment a position crosses the liquidation threshold. The 0.1% base penalty is sufficient compensation for immediate action — it does not require a position to deteriorate further before liquidation becomes economically viable.
Auto-deleveraging (last resort)
In extreme scenarios where standard liquidations fail to resolve unhealthy positions — such as severe market volatility or insufficient liquidator activity — Kamino has an auto-deleveraging mechanism that can proportionally reduce the largest leveraged positions in the system. This is a last-resort safety measure designed to protect the solvency of the lending pools when normal market incentives are insufficient. It has not been triggered in Kamino’s operational history.
Avoiding liquidation
The primary levers for managing liquidation risk are:
- Maintain a buffer — Keep Current LTV well below Liquidation LTV. A tight buffer leaves no margin for collateral price drops or rising debt from accruing interest.
- Monitor collateral value — A decline in collateral price directly increases Current LTV, moving the position toward the liquidation threshold without any borrower action.
- Monitor borrow rates — Variable rates mean your debt balance grows faster when rates rise. Sustained high utilization in a pool increases debt continuously, compressing your buffer.
- Add collateral or repay debt — Either action reduces Current LTV. Repaying debt is typically more capital-efficient when you are close to the threshold.
- Use Repay with Collateral — Allows you to deleverage atomically by converting deposited collateral into the debt asset and repaying in a single transaction, without needing to source the repayment token externally. See Borrowing.
