DeFi Liquidations: How They Work and Why You Get No Warning

DeFi liquidations are triggered automatically when your collateralization ratio falls below a protocol's threshold, with no human review or warning.

The moment your health factor crosses the line, bots start racing to sell your collateral, often within the same block.

Aave charges a liquidation bonus of 5% to 13%, while Compound lets liquidators seize up to 50% of a position's debt at once.

On May 19, 2021, more than $8 billion in crypto positions were liquidated across DeFi and centralized platforms.

To avoid getting liquidated, keep your health factor above 1.5, ideally closer to 2, and set up wallet monitoring tools that can add collateral or repay debt on your behalf when needed.