The Starfish Protocol utilizes a scored Health Factor for loans. The formula is outlined below. When the Health Factor of an NFT loan is below 1, anyone can trigger a liquidation in terms of an NFT Auction.
To get a timely liquidation alert before the liquidation event actually happens, borrowers can update their account with their email address. When the Health Factor becomes less than 2 (Risky), borrowers will receive a potential liquidation alert.
The definition for Health Factor:
(Floor Price * Liquidation Threshold) / Debt with Interests
To avoid liquidation, you can increase your health factor by repaying part of your loan. It's always recommended to have a close look on your health factor and keep it high to avoid liquidation. Keeping your health factor above 2 gives you more of a margin to avoid liquidation.
Once your health factor is below 2, your NFT collateral will be listed on Health Factor Alert List, and you'll receive a notification on your NFT is "Risky" in being liquidated.
At the beginning stage, Starfish protocol will be acting as the sole liquidator for all NFT positions that are with health factor below 1.
Liquidations will be open to all after the our liquidation and auction features becomes stable and widely used.