The process of repaying a borrower's debt by selling their collateral when their position's LTV exceeds the liquidation threshold. Liquidators (typically bots) repay a portion of the debt and receive the collateral at a discount (liquidation bonus, typically 5-10%). Liquidation keeps lending protocols solvent. On Solana, liquidation bots compete via Jito bundles.
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The process of repaying a borrower's debt by selling their collateral when their position's LTV exceeds the liquidation threshold. Liquidators (typically bots) repay a portion of the debt and receive the collateral at a discount (liquidation bonus, typically 5-10%). Liquidation keeps lending protocols solvent. On Solana, liquidation bots compete via Jito bundles.
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AMMs, routing, liquidity, lending, and trading infrastructure.
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Liquidation (liquidation) Category: DeFi Definition: The process of repaying a borrower's debt by selling their collateral when their position's LTV exceeds the liquidation threshold. Liquidators (typically bots) repay a portion of the debt and receive the collateral at a discount (liquidation bonus, typically 5-10%). Liquidation keeps lending protocols solvent. On Solana, liquidation bots compete via Jito bundles. Related: Lending Protocol, Collateral, LTV (Loan-to-Value)
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A DeFi protocol that enables users to deposit tokens to earn yield and borrow tokens against collateral. Key Solana lending protocols include Solend, MarginFi, Kamino, and Save (formerly Solend v2). Lending rates float based on utilization (borrowed/deposited). Deposits receive interest-bearing receipt tokens representing their share.
Assets deposited into a lending protocol to secure a loan. Each asset has a collateral factor (e.g., SOL at 80% means $100 of SOL supports $80 in borrows). If the collateral value drops below the maintenance threshold, the position is liquidated. Volatile assets have lower collateral factors than stablecoins.
Loan-to-Value ratio—the percentage of collateral value that can be borrowed. Each lending protocol sets max LTV per asset (e.g., 75% for SOL means $100 SOL collateral = max $75 borrow). If debt/collateral exceeds the liquidation LTV (e.g., 85%), the position is liquidatable. Conservative LTV settings protect against rapid price drops.
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A discount on collateral that incentivizes liquidators to repay the debt of unhealthy positions in lending protocols. When a position's health factor drops below 1, liquidators can repay a portion of the debt and receive the equivalent collateral value plus a bonus (typically 5-15%). The bonus must be large enough to cover transaction costs and risk, but not so large that borrowers suffer excessive losses.
A platform that facilitates new token launches by providing infrastructure for initial token sales, price discovery, and liquidity bootstrapping. On Solana, launchpads include Jupiter LFG (community-voted launches), Raydium AcceleRaytor, and Pump.fun (bonding curve model). Launchpads typically handle token distribution, initial DEX liquidity provision, and anti-bot measures for fair participation.
Using borrowed funds to amplify trading exposure beyond deposited capital. In perps, 10x leverage means $100 collateral controls a $1,000 position. Gains and losses are multiplied proportionally. If losses approach the collateral amount, the position is liquidated. Higher leverage increases both potential returns and liquidation risk.
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A DeFi protocol that enables users to deposit tokens to earn yield and borrow tokens against collateral. Key Solana lending protocols include Solend, MarginFi, Kamino, and Save (formerly Solend v2). Lending rates float based on utilization (borrowed/deposited). Deposits receive interest-bearing receipt tokens representing their share.
Assets deposited into a lending protocol to secure a loan. Each asset has a collateral factor (e.g., SOL at 80% means $100 of SOL supports $80 in borrows). If the collateral value drops below the maintenance threshold, the position is liquidated. Volatile assets have lower collateral factors than stablecoins.
Loan-to-Value ratio—the percentage of collateral value that can be borrowed. Each lending protocol sets max LTV per asset (e.g., 75% for SOL means $100 SOL collateral = max $75 borrow). If debt/collateral exceeds the liquidation LTV (e.g., 85%), the position is liquidatable. Conservative LTV settings protect against rapid price drops.
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A protocol that enables token swaps using algorithmic pricing against pooled liquidity instead of matching individual buyers and sellers. AMMs use mathematical formulas (typically constant product x*y=k) to determine prices based on the ratio of tokens in a liquidity pool. On Solana, major AMMs include Raydium, Orca, and Meteora.
An AMM design where liquidity providers concentrate their capital within specific price ranges instead of across the full 0-to-infinity range. CLMMs dramatically improve capital efficiency—LPs earn more fees per dollar deposited within their active range. If the price moves outside the range, the position becomes inactive. Orca Whirlpools and Raydium CLMM are leading implementations on Solana.
A smart-contract-held reserve of two or more tokens that enables trading via an AMM. Users deposit token pairs in specified ratios to become liquidity providers and earn trading fees. Pools are identified by their token pair and fee tier. Pool depth (total value locked) determines price impact for trades.
A token issued to liquidity providers representing their proportional share of a pool's reserves and accrued fees. LP tokens can be burned to withdraw the underlying assets. The value of LP tokens changes as the pool's token ratios shift and fees accumulate. LP tokens are often stakeable in yield farming programs for additional rewards.