How Does Liquidation Impact the Borrower’s Position?

When a position is liquidated, the borrower loses the collateral that was sold to repay the stablecoin debt, and they typically incur a liquidation penalty. This means the borrower receives less of their initial collateral back than they would have if they had repaid the debt themselves.

The liquidation closes the debt position, but the borrower suffers a loss on their collateral.