Liquidation Process

Partial Liquidations

If your Health Ratio drops below 1.2, your position becomes eligible for liquidation.

Unlike traditional protocols that liquidate the full position, EnsoFi uses soft, partial liquidations. Instead of closing everything at once, EnsoFi will liquidate only a portion of your debt—typically around 20%—by selling just enough collateral to bring your Health Ratio back above 1.2.

If the Health Ratio is still below 1.2 after this partial liquidation, the process will continue in small steps until your position is fully healthy again.

Liquidation Penalty

When a borrower is liquidated, a penalty fee is applied. This fee varies by lending pool and is deducted from the collateral sold during liquidation.

For example: If the penalty is 5% and $100 of collateral is sold, → $95 goes toward repaying the borrower’s debt → $5 is sent to the Liquidation Reserve

This ensures the protocol remains solvent and incentivizes responsible borrowing.