Health Factor
The Health Factor is a numeric indicator of your account's stability, with values below 1 or near it potentially leading to liquidation. Higher values indicate a safer position. You can monitor your health factor and other important metrics in your Account Overview on the Dashboard page.
How is the Health Factor calculated?
The Health Factor (HF) is calculated based on the Threshold Weighted Value (TWV) of the assets in your Credit Account and the Borrowed assets’ Value (BV):
Threshold Weighted Value
The Threshold Weighted Value is the weighted sum of the asset values multiplied by their respective liquidation thresholds multiplied by a Base Liquidation Threshold of 94.5%.
$$ TWV = \sum_{i=1}^{n} (A_i \times LT_i \times BLT) $$
Where:
( A_i ) is the value of the (i)-th asset.
( LT_i ) is the liquidation threshold of the (i)-th asset.
( BLT ) is the Base Liquidation Threshold.
Liquidation Threshold
USDC 94.5%
wETH 94%
wBTC 94%
These liquidation thresholds are set based on the risk of asset price fluctuations, aiming to enhance the safety and stability of the protocol.
Example
User A has opened a Credit Account (CA) with 1000 USDC as collateral and borrowed 2000 USDC with a 3x leverage. Shortly after, User A swapped 1000 USDC into wETH. As a result, the CA now holds 1000 USD worth of wETH and 2000 USDC in total.
At this moment the TWV of this CA is (1000 * 94.5% + 2000 * 94%)* 94.5% which is 2669.
With no interest accrued so far, the denominator is BV alone which should be 2000.
The Health Factor of this CA is 2825 / 2000 which is 1.3348.
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