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Sunday, October 25, 2026
🔬 Liquidation basics

In decentralized lending protocols (Aave, Compound, MakerDAO), a loan's Health Factor measures collateral adequacy against debt. When Health Factor drops below 1.0, smart contracts automatically execute collateral liquidations, charging penalty fees (5-15%). The Liquidation Price equation is: Debt / (Collateral Amount × Liquidation Threshold).

DeFi Liquidation & Health Factor Calculator

Model loan-to-value (LTV) exposure, liquidation margins, and collateral drawdown risk under severe volatility.

Current Health Factor
1.40
Exact Liquidation Price
$2,424
Market Drop Buffer
-28.7%

DeFi Flash Loan Vulnerabilities and Cascading Liquidations

Oracles relying solely on DEX spot pools rather than volume-weighted Time-Weighted Average Price (TWAP) or Chainlink feeds remain vulnerable to price manipulation attacks. Maintaining a Health Factor above 1.8 is critical during macro volatility cascades to prevent MEV liquidation bots from front-running collateral salvage transactions.