Illustration of Borrower Liquidation (without replacement borrower)

A borrower is liquidated for not maintaining the required collateralization ratio. A replacement borrower is not assigned during the liquidation.

In Step 1, Borrower A borrows with a relatively risky collateralization ratio of 159%.

In Step 2, the value of ETH drops from $3000 to $2400, causing Borrower A's collateralization ratio to drop below the 130% liquidation threshold.

In Step 3, we illustrate a profitable liquidation, meaning there is excess left over after paying Lender A back. The remainder after paying back Lender A is split among the borrower and the protocol according to the liquidation parameters, but in this profitable liquidation example, Borrower A receives the majority of the remaining funds back.