Liquidation Examples

A borrower has deposited a fungible LP token from an approved stable or weighted pool. Over time, pool composition and oracle inputs move enough that the account no longer has sufficient adjusted collateral value for its debt.

• • The liquidation node detects the shortfall and sources execution liquidity.
• • Debt is repaid and the LP token is redeemed into its underlying assets.
• • Claimable fees are realized if available and helpful to recovery.
• • Underlying assets are routed into the debt asset and the liquidation closes.
• • Any value left after repayment and reward is returned to the borrower.

As the market price moves toward the edge of a concentrated-liquidity position's range, its token inventory and recoverable value change. Liquidation becomes possible when the resulting account health crosses the configured threshold.

• • The node values the position from its current range, liquidity, and token split.
• • Once liquidation begins, claimable fees are checked before principal is unwound.
• • Routing adapts to the actual inventory recovered rather than a static token mix.
• • Settlement follows the same pattern: repay execution liquidity, pay reward, return residual value.

A borrower deposits a Uniswap v3 NFT and the account later becomes eligible for liquidation. Settlement resolves the individual NFT-backed position because its liquidity, range, and fees belong to that specific position.

• • Aave seizes the vault token balance tied to the NFT-backed position.
• • Avana burns the vault token and moves the real LP position into settlement.
• • The settlement module unwinds, sells, auctions, or transfers the position.
• • Debt is repaid first, the liquidator reward comes next, and any surplus follows the market rule.
• • Settlement of the NFT resolves the whole backing position; any surplus is handled separately under the market rule.

A borrower may hold several LP positions inside one Borrow Spoke. Capacity is aggregated across those positions, but the unwind still has to happen at the position level once the account turns unhealthy.

• • The spoke reports one aggregate borrowing capacity to the Hub.
• • When the account becomes unhealthy, the liquidation node chooses the unwind path that best restores solvency.
• • One position may be enough to close the shortfall, or several may need to be partially or fully unwound.
• • Execution order, consistent oracle inputs, and route depth affect the amount recovered.