⚠️ RISKS & SECURITY
Health Factor
Definition
Health factor is a numerical indicator of the safety of a lending position, representing the ratio between collateral value and borrowed value adjusted by liquidation thresholds. A health factor above 1 means the position is safe; below 1 means it can be liquidated. The higher the health factor, the safer the position but the lower the capital efficiency.
Example
Example
With a health factor of 1.5, your position has a 50% safety buffer before liquidation. If your collateral drops in value or your debt increases, the health factor falls toward 1.
Risks to Consider
Risks
- Rapid health factor drops during volatility
- Liquidation cascade risk
- Oracle delay risk
Common Questions
What's a safe health factor?
It depends on the asset volatility. For volatile assets, a health factor of 2+ is recommended. For stablecoins, 1.5 may suffice. Always monitor during market turbulence.
