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Liquidation is a key part of how Jupiter Lend maintains the safety and stability of the protocol. When a user’s borrowing position becomes too risky, meaning the value of their collateral falls relative to their debt, the protocol automatically sells just enough collateral to repay part or all of the loan and bring the position back to a healthy state.

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How Liquidation Works

Each position on Jupiter Lend is assigned a debt-to-collateral ratio, which measures the size of your debt compared to the value of your collateral. When this ratio exceeds a vault’s Liquidation Threshold (LT), the position becomes eligible for liquidation. To make the process efficient, Jupiter Lend uses a tick-based approach. Positions with similar risk levels (similar ratios) are grouped into ticks. If market conditions change and one tick crosses its liquidation threshold, all positions within that tick are processed together in a single, optimized transaction. This allows liquidations to be handled faster, more efficiently, and with less market impact. Once liquidated, the remaining positions are automatically rebalanced into the next tick that matches their new ratio. If a position’s ratio exceeds the Liquidation Max Limit (LML), it exits the tick system entirely and is fully liquidated to zero.
Unlike systems where an entire position might be liquidated at once, Jupiter Lend only liquidates the minimum necessary amount to restore the position’s health.This partial liquidation model reduces the risk of large sell-offs and prevents cascading liquidations, where one event triggers another, helping stabilize markets even during high volatility.
When a position is liquidated, a penalty is applied only to the portion of the position that is actually liquidated, not to the entire collateral. This penalty rewards liquidators for helping maintain system stability.The penalty rate varies by vault. As a result, users experience smaller losses even in liquidation events.

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Debt-to-Collateral Ratio

On Jupiter Lend, position risk is assessed using the debt-to-collateral ratio: your debt divided by the value of your collateral. The maximum borrowing percentage is determined by the vault’s Loan-to-Value (LTV) ratio. The Liquidation Threshold (LT) is always higher than the LTV, creating a buffer between the maximum you can borrow and the point where liquidation begins. Position Health is the status that shows how close your position is to liquidation. It reflects your current debt-to-collateral ratio relative to the Liquidation Threshold. The closer you are to the threshold, the higher the risk.
You have 20 SOL worth $4,000, and the vault’s Liquidation Threshold is 80%.You borrow 1,000USDCagainst1,000 USDC against 4,000 of collateral. Your debt-to-collateral ratio is 25%. The position displays: 25% / 80%.If SOL falls to 100each,yourcollateralisnowworth100 each, your collateral is now worth 2,000 while your debt remains $1,000. Your ratio is now 50%. The position displays: 50% / 80%.If you then remove 500worthofSOLfromyourvault,yourremainingcollateralis500 worth of SOL from your vault, your remaining collateral is 1,500 with $1,000 debt. Your ratio is now 66.7%. The position displays: 66.7% / 80%.