What is liquidation risk?
Liquidation risk is the possibility that your collateral gets seized — partially or fully — to repay your debt. It applies to every borrowing position on Fira, in both fixed-rate and variable-rate markets.
What can happen
When your Loan-to-Value (LTV) ratio breaches the Liquidation LTV (LLTV) threshold, your position becomes eligible for liquidation. At that point, any external liquidator can repay part of your debt and claim your collateral — automatically, on-chain, with no advance warning.
Concrete scenarios that trigger liquidation:
Collateral price drops — Your collateral loses value faster than you can add more or repay debt
Borrowed asset appreciates — The asset you borrowed increases in value relative to your collateral
Network congestion — You try to add collateral or repay but the transaction doesn't confirm in time
Oracle price updates — A new price feed update puts you immediately below the threshold
Cascading liquidations — A market-wide stress event pushes many positions under LLTV simultaneously, overwhelming the liquidation queue
Liquidations are irreversible. Once executed, you cannot undo the loss of collateral.
How Fira mitigates this
LLTV thresholds are set conservatively (e.g. 90% for stablecoin-backed markets, 89% for wstETH/USDC) to provide a buffer between max borrowing LTV and the liquidation threshold
The max LTV (how much you can borrow) is set below the LLTV, giving borrowers a safety margin at entry
Liquidation penalties are calibrated to incentivize fast liquidation while limiting excess collateral loss
What you can do
Borrow significantly below the maximum LTV — the closer you are to LLTV, the less buffer you have
Monitor your Health Factor regularly — especially during volatile market conditions
Set up external alerts; the interface does not send push notifications before liquidation
Have funds ready to add collateral or repay quickly if conditions deteriorate
Liquidations are automatic and cannot be reversed. The protocol does not warn you before executing one.
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