Risk & Liquidation

Understanding liquidation risk is essential when borrowing on any lending protocol. Purinta makes this as transparent as possible with real-time health monitoring and built-in safety buffers.

What is Liquidation?

When you borrow USDC against your meme tokens, the protocol continuously monitors the ratio between your debt and your collateral value. If the value of your collateral drops enough that your loan-to-value ratio exceeds the LLTV (Liquidation Loan-to-Value) threshold of 62.5%, your position is liquidated: your collateral is sold to repay the loan.

This is standard DeFi lending behaviour — Purinta does not introduce any novel risk here. All liquidation logic runs on Morpho Blue's audited smart contracts.

The Health Indicator

Purinta displays a health indicator for each of your positions using a row of hearts. More filled hearts means a healthier position — further from liquidation. Here's what the different levels mean:

• All hearts filled — you have supplied collateral but borrowed nothing (or very little)
• Half filled — you're borrowing half of the maximum allowed amount
• No hearts filled — you've reached the liquidation threshold

As your position health decreases, hearts start to fade, giving you a quick visual cue to take action.

Liquidation Price

For each position, Purinta calculates and displays the liquidation price — the price at which your collateral token would trigger liquidation. If the market price of your collateral drops to this level, your position will be liquidated.

Example: You supply $100 worth of PEPE and borrow $50 USDC. Your liquidation price is the PEPE price at which $50 exceeds 62.5% of your collateral value — meaning your PEPE would need to fall to $80 in value (a 20% drop) for liquidation to occur.

caution

Your position accrues interest over time, which slowly increases your debt. This means your liquidation price gradually rises even if the market price stays the same. Keep this in mind for long-held positions.

Built-in Safety Buffer

The UI limits your maximum borrow to 95% of the theoretical LLTV maximum, giving you automatic breathing room even when borrowing the max.

How to Avoid Liquidation

• Don't borrow the maximum — leave a comfortable margin between your borrow amount and the LLTV limit
• Monitor your positions — check your portfolio regularly, especially during volatile markets
• Add collateral — supply more meme tokens to improve your health factor
• Repay early — reduce your debt when you see your health factor declining
• Watch liquidation price — compare it to the current market price of your collateral token

What Happens During Liquidation?

If your position reaches the LLTV threshold:

1. A liquidator repays some or all of your outstanding USDC debt
2. In exchange, the liquidator seizes collateral equal to the repaid debt value plus a ~12.68% liquidation bonus
3. Any remaining collateral stays supplied in the market and can be withdrawn

Only the collateral needed to cover the liquidated debt plus the bonus is seized — not your entire supply. However, depending on how far past the LLTV your position has moved, most or all of your collateral may be taken.

The best strategy is to monitor your positions and act before liquidation occurs. For full details on liquidation mechanics, see the Morpho documentation.

Smart Contract Risk

Purinta itself does not deploy any custom smart contracts. All lending, borrowing, and liquidation logic is handled by Morpho Blue, which has undergone extensive audits. Your risk exposure is limited to:

• Morpho Blue smart contract risk — the same risk as any Morpho user
• Oracle risk — price feed accuracy (mitigated by Api3's dAPI infrastructure)
• Market risk — meme token price volatility (inherent to the collateral you choose)