> For the complete documentation index, see [llms.txt](https://spherex-4.gitbook.io/spherex/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://spherex-4.gitbook.io/spherex/mechanism/liquidation.md). # Liquidation The liquidation mechanism within SphereX is designed to maintain the security and stability of the platform during borrowing and trading processes. When a user’s collateral value falls below a certain threshold, the system automatically initiates liquidation to prevent further losses. * **Liquidation Trigger**: When users engage in borrowing or leveraged trading, and the market value of their collateral significantly drops, causing the collateral to no longer cover the borrowed amount or leveraged position, the system automatically triggers liquidation. * **Liquidation Process**: A portion or all of the user’s collateral will be sold to repay outstanding debt. This process is executed by smart contracts, ensuring fairness, transparency, and efficiency. * **Avoiding Liquidation**: Users can avoid liquidation by adding more collateral or repaying their debt early. SphereX provides real-time market data and alerts to help users make timely decisions and mitigate liquidation risks. * **Impact of Liquidation**: The liquidation mechanism protects the overall stability of the platform and ensures the safety of other users' funds. It is a crucial tool for maintaining the healthy operation of the decentralized financial system. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter: ``` GET https://spherex-4.gitbook.io/spherex/mechanism/liquidation.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.