Liquidation Mechanisms

To prevent losses from under-collateralized loans, Nebula employs automated liquidation systems.

Liquidation Triggers

When the value of a borrower’s collateral falls below the required threshold, their position becomes eligible for liquidation.

Liquidation Process

• A portion of the borrower’s collateral is sold to repay the loan.

• This stabilizes the protocol’s liquidity.

Liquidation Penalties

• Borrowers incur penalties for under-collateralization.

• Part of the penalty is distributed to liquidators as an incentive and to the insurance fund for added protection.