# CDP liquidations

as a collateral backed debt issuance platform, it is important that vault and system collateral is maintained at appropriate levels to back any fxToken debt; ensuring each remains representative of their underlying currencies face value.\
\
the core principles, underpinning the protocol liquidation process are;

* if the collateral value, or c-Ratio,  of a vault falls below its **minimum c-Ratio**, that vault is deemed to be 'at risk' or "underwater'. In this state it can be subject to a 1:1 redemption call on its collateral by fxToken holders.
  * this mechanism ensures that in the case an fxToken trades at a discount to its face value, an arbitrage opportunity exists, thus creating an incentive to drive it back to parity.

{% hint style="info" %}
\*only collateral from vaults that have a current c-Ratio < min c-Ratio can be redeemed against.&#x20;

redemption contraction can be accessed through [arbiscan](https://arbiscan.io/address/0xb67f86850d3ee15f3e844d5e987da5712cb589d3).
{% endhint %}

* if a vault's c-Ratio falls below its **liquidation trigger** it will automatically be subject to a **liquidation process** to repay excessive debt and bring the collateral ratios back to acceptable limits.
  * handle.fi makes use of its [fxKeeper pools](https://docs.handle.fi/liquidations/keeper-pools) to ensure that liquidation is promptly triggered and executed.

{% hint style="info" %}
vaults are liquidated when the **c-Ratio falls below 160%**
{% endhint %}

### the liquidation process

1. when a vault falls below it's c-Ratio liquidation trigger, liquidation begins.&#x20;
2. sufficient vault collateral is sold (largest position to smallest holdings) to repay enough fxToken debt and return the c-Ratio to its required minimum plus a 10% buffer.
3. a [liquidation fee](https://docs.handle.fi/fees) is the charged to the vault being liquidated. this fee is disbursed to protocol and the relevant fxKeeper pool that funded the liquidation.\
   \
   \*any accrued $FOREX rewards for that vault are forfeited; transferred to the fxKeeper pool and protocol.

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