Liquidation ensures that there is always sufficient collateral to cover all PAR/paUSD tokens. Vaults below a specified health factor are subject to liquidation by profit-seeking actors in the network. Network actors have a financial incentive to trigger liquidations as fast as possible. This has the positive effect of removing risky vaults from the system.

A liquidation fee is charged to the Borrower during liquidation, added to the outstanding debt.

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