On VMEX, a liquidation occurs when a borrower’s health factor drops below 1 due to the value of their collateral no longer covering the required loan-to-debt value. The two ways a liquidation might occur are 1) the value of collateral decreases relative to the borrowed asset or 2) the borrowed asset increases in value relative to the borrower’s collateral.

VMEX, using the same process as Aave, incentivizes liquidations by auctioning off a borrower's collateral to liquidators at a discount to the current market value. When a liquidation occurs, up to 50% of a borrower’s debt can be repaid in exchange for the liquidated collateral plus a liquidation bonus.

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