To prohibit borrowers from defaulting on their loans, Orchai liquidation contract liquidates all loans with a borrowing amount above the borrowing limit (borrowCapacityborrowCapacity is higher than 100%)

Orchai liquidation mechanism is Auction Liquidation, in which participants bid against each other to become a liquidator. Bids with matching liquidation discounts are pooled together in a liquidation pool to have the same execution priority. Pools with lower discounts are given a higher execution priority, thus being executed first during liquidation events. This system enables liquidators to buy Orchai collateral at the desired liquidation discount.

The protocol's use instructions are provided in User Guide.

Conversions between whitelisted sAssets and USDT are facilitated using the Oraichain Oracle Price Feeds as the reference price feed.

When liquidating, bids are processed in ascending order of premium rate from the liquidation pools. The lowest premium bids are completed first, and this process is repeated until all of the requested liquidation amounts have been fully consumed. The collateral that is liquidated is credited to the liquidator, available for later withdrawal.

Liquidated collaterals are credited proportionately to each bidder's share of the bid amount as bids with the same premium slot are combined.

A liquidation charge of 1% of the liquidated value is added and transferred to Orchai's treasury.

To safeguard borrowers, all liquidations are partial liquidations.

Partially liquidating loan positions are liquidated until the user borrowCapacityborrowCapacity reaches below the 80%.

Loan positions with borrowCapacityborrowCapacity of 80% or below are recommended.

Because smart contracts are message-driven, liquidation can only occur when triggered by an external party. Keepers are given 0.1% of the liquidated value as an incentive to actively monitor harmful loans and trigger liquidations.

Before being liquidated, money in the liquidation pool is not used for anything, leading to unprofitable. To optimize liquidity and attract liquidators, part of the money in the liquidation pool is deposited back into the protocol to earn lending yield. This yield is being divided equally among all participants in the pool. So liquidators not only earn liquidation bonuses when liquidating but also earn lending yield when waiting for a chance to liquidate.

To prevent the situation in which the liquidator is unable to take funds from the liquidation pool because the borrower has borrowed all of the funds in the Orchai Money Market. Orchai liquidation mechanism only sent half of the funds, so liquidators can only earn about 50% to 60% lending yield compared to lenders.

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