Borrowing Tokens is not free, you pay daily interest on your borrowed position. When Borrowing tokens, it's important to keep sufficient collateral so that you do not get liquidated.
What is 'Liquidation'
Liquidation is the process of selling collateral assets to cover the debt.
This process is automated by a smart contract.
This can happen if the market has volatile price movements, shifting a portfolio position into 'debt'
To avoid Liquidation
Add more of the supplied collateral, to improve the collateralization ratio.
Or, pay back part of the existing debt.
Users of Banker Joe should maintain proper risk management with their portfolio. Maintain a large buffer between your collateral and borrowed debt to reduce risk of liquidation.
Liquidation Process in Detail
Liquidations can happen if market has sudden price movements and cause
collateral value < borrowing value.
It can also happen, after time, if your
total deposit APY < total borrow APY. This means that your borrowing interest rate is greater than your deposit APY.
You can monitor your
borrow limit usedto avoid liquidations.
Net APYmeans that your deposit interest will pay for your loan interest.
borrow limit usedwill present less liquidation risk.
borrow limit usedincreases and becomes too high, you may repay some borrowed tokens, or add more collateral.
Using an Application to monitor your Liquidation Threshold
The DeFi Notifications Protocol App lets you set a custom threshold notification to monitor your borrowing health when engaging in lending/borrowing on Banker Joe. This app is fully decentralised, free and monitors on-chain data. When breaching your set threshold, you will receive a notification on your device providing you with enough warning and time to manage your positions accordingly.
You can download the app from here: https://www.orbs.com/notifications-launch/