SP Liquidation Values

Liquidation values are used within GLIF to determine borrow limits and liquidations

Understanding liquidation values

Every Filecoin Miner Actor owned by a Storage Provider has an associated liquidation value. The liquidation value can be computed as:

$$LiquidationValue = MinerBalance - MinerMaxTerminationFee$$

$$MinerBalance = AvailableBalance + VestingBalance + InitialPledge$$

Using an example, imagine the following hypothetical miner:

• Available balance: 10 FIL

• Pledged balance: 100 FIL

• Vesting balance: 20 FIL

• Maximum termination fee: 10 FIL

The total balance of this miner is 130 FIL, and its maximum termination fee 10 FIL. Therefore, it's liquidation value of this miner would be 120 FIL.

Storage Providers must keep close track of their liquidation value to determine borrowing limits and avoid liquidations.

Recovery rates

The recovery rate describes the portion of an SP's pledged FIL that would be recovered in a liquidation event. Recovery rate is computed as:

$$RecoveryRate = (PledgeBalance - MaxTerminationFee) / PledgeBalance$$

Using an example, imagine the following hypothetical miner:

• Pledged balance: 100 FIL

• Maximum termination fee: 10 FIL

This miner's recovery rate would be 90% - GLIF would expect to recover 90 FIL after liquidating this miner.

Although the termination penalty fee is a hypothetical estimate, it does not compromise protocol safety. With DTL capped at 90% for all Storage Providers, the liquidation value would need to be overstated by more than 10% before the position becomes undercollateralized, which provides a significant buffer against estimation error.