Understanding Liquidations and Fees on Jet Protocol
Recently we’ve seen a lot of questions and interest in how Jet Protocol handles parameters in the system such as liquidations and fees. Especially during times of high market volatility, it’s important for users to know where their financial positions on Jet stand at any given moment, so we want to clarify a few important details to consider when lending and borrowing on Jet.
Thank you to our community members in the forum, discord and telegram group as well for asking these great questions and we hope they help! You can find these individual articles in our documentation as well here and here.
On Liquidations:
What is a C-ratio?
Jet’s C-ratio is the collateral-to-loan ratio. This C-ratio can be calculated using the following formula:
C-ratio = collateral value / borrowed value
A good way to think about the C-ratio is when you deposit $200 worth of Bitcoin as collateral, and then borrow $100 worth of USDC, the current C-ratio would be 200%.
What is the liquidation threshold?
Currently the liquidation threshold on Jet Protocol is 125%. A portion of your collateral will be liquidated to maintain a healthy C-ratio when it drops below 125%.
When you try to process a borrow or withdraw transaction that would bring your current c-ratio below 150%, the co-pilot system message will alert you that this is an unhealthy C-ratio.
How can I avoid liquidation?
When the market is volatile, you are at a lower risk of getting your account liquidated when your c-ratio is at 500% compared to when your C-ratio is at 200%. Your C-ratio can drop much faster than you expect in highly volatile environments, so it’s best to always check where your ratio is at and be prepared to either add more funds to top it off or repay and close your position.
On Fees
Solana Rent Fees
When you open your account on Jet, rent is charged by Solana which can be fully refunded in the future when you close all your account obligations on Jet. This is true for all protocols which allocate space per user on-chain.
Solana Transaction Fees
Currently there is no extra Jet originated fee added to your transactions. Only the minimal transaction fees on the Solana network are required to handle your transactions on Jet.. The Solana transaction fees are debited from your wallet when your transaction is processed.
Liquidation Fees
When your C-ratio drops below the 125% threshold, a portion of the collateral position is liquidated to return your C-ratio to at least 125%. A 3% liquidation fee is applied to the portion of your collateral that was liquidated.
If you have more than one collateral type in your deposit, the current version of liquidator picks a random collateral type to partially liquidate to bring your c-ratio to healthy status.
Interest Accrual
For collateral and loan accounts, interest accrues and gets continuously compounded to your respective accounts.
As always, if you ever have questions about Jet — we encourage you to drop into one of our communications channels and let us know! If we don’t have a source to direct you to we’ll gladly get you an answer and document it!
Good luck out there apes!
Disclaimer: The statements, proposals, and details contained above are informational only, and subject to change. We are in early stage development and may need to change dates, details, or the project as a whole based on the protocol, team, legal or regulatory needs, or due to developments of Solana.
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