# Liquidations

On Kinetic, liquidations occur when a borrower's collateral falls to or below a health factor of 1. In the event of liquidation, a portion of supplied assets is liquidated to repay the outstanding loan. This process ensures that the platform and its suppliers remain solvent.

### How Liquidations Happen

1. Health Factor Monitoring: Each borrower's health factor is continuously monitored. The health factor is a numerical representation of the borrower's collateralization level.
2. Triggering Liquidation: When the health factor is equal to or falls below 1, it indicates that the borrower's collateral is insufficient to cover their borrowed assets. At this point, liquidation is triggered.
3. Liquidation Process: During liquidation, up to 50% of the borrower's supplied assets are sold off to repay a portion of their outstanding loan. This is designed to bring the health factor back to a safer level above 1, as the borrower had been over-collateralized.

#### Liquidation Penalty 

A liquidation penalty of 11% will be applied during the liquidation process. The liquidation process is decentralized and open to all potential liquidators.

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