The Liquidation Protection is the protocol mechanism that ensures the redistribution of balances to prevent a lending liquidation on Aave, when the LTV goes beyond the rate limit defined by the DAO.
The target LTV of the protocol is set to 87%, with a maximum of 93% on which will trigger the liquidation protection and the rebalancing. The maximum LTV allowed on Aave is 95%, which gives the protocol a margin for the trigger to take place.
Although the target LTV is set to 87%, once liquidation protection is activated, it will be set to 88% for a smoother rebalance and prevent bigger capital losses for the users.
Step | Collateral (wstETH) | Collateral (ETH) | Debt (ETH) | Debt Ratio | ETH/wstETH | Assets | Target LTV | Max LTV | Debt to Pay | Capital Loss (%) |
---|---|---|---|---|---|---|---|---|---|---|
0 - Initial State | 85 | 100 | 80 | 80.00% | 0.85 | 20 | 80.00% | 88.00% | 0 | |
1 - Depeg | 76.71 | 95 | 80 | 84.21% | 0.8075 | 15 | 80.00% | 88.00% | 0 | |
2- Repeg | 85 | 100 | 80 | 80.00% | 0.85 | 20 | 80.00% | 88.00% | 0 | 0% |
Result: No Capital Loss
Step | Collateral (wstETH) | Collateral (ETH) | Debt (ETH) | Debt Ratio | ETH/wstETH | Assets | Target LTV | Max LTV | Debt to Pay | Capital Loss (%) |
---|---|---|---|---|---|---|---|---|---|---|
0 - Initial State | 85 | 100 | 80 | 80.00% | 0.85 | 20 | 80.00% | 88.00% | 0 | |
1 - Depeg | 84.58 | 93 | 80 | 86.02% | 0.9095 | 13 | 80.00% | 88.00% | 0 | |
2- Repeg | 85 | 100 | 80 | 80.00% | 0.85 | 20 | 80.00% | 88.00% | 0 | 0% |
Result: No Capital Loss
Step | Collateral (wstETH) | Collateral (ETH) | Debt (ETH) | Debt Ratio | ETH/wstETH | Assets | Target LTV | Max LTV | Debt to Pay | Capital Loss (%) |
---|---|---|---|---|---|---|---|---|---|---|
0 - Initial State | 85 | 100 | 80 | 80.00% | 0.85 | 20 | 80.00% | 88.00% | 0 | |
1 - Depeg | 84.15 | 90 | 80 | 88.89% | 0.935 | 10 | 88.00% | 88.00% | 0 | |
2- Pay Debt | 77.92 | 83.33 | 73.33 | 80.00% | 0.935 | 10 | 88.00% | 88.00% | 6.67 | |
3- Repeg | 77.92 | 91.67 | 73.33 | 80.00% | 0.85 | 18.33 | 80.00% | 88.00% | 0 | -8.33% |
Result: Minor Capital Loss