🥤Liquidations (Process)

Liquidation is the process of automatically selling a user’s collateral and repaying some of their debt when their debt-to-collateral ratio drops beyond the given threshold. This ensures that there is enough collateral backing the SHELL decentralized stablecoin from a user’s vault.

SummerTime uses a partial liquidation mechanism similar to Aave. Partial liquidation is the process of selling only a portion of assets to repay a portion of the debt.

Liquidations occur when your debt (the value of the SHELL) minted, to collateral ratio, falls below the required ratio eg. below 150%.

SummerTime will calculate how much of your collateral needs to be sold, swapped to SHELLs, and used to pay enough debt to rebalance the debt-to-collateral ratio back to 150%. This ensures you never lose all your collateral and only enough is sold to rebalance the debt-to-collateral ratio back to what is standard. This is what is known as partial liquidation.