Liquidations
RAVA aggregates RWA liquidation opportunities across Aave, Morpho, and Euler. One feed. The default flow is the same as any other liquidation tool. RAVA leverage is optional.
What you do
- Pick a position from the live feed
- Choose how much of the borrower's debt to repay
- Settle the liquidation. The venue sends you the collateral at its bonus
- Hold to the issuer next redemption window for NAV, or exit on chain
Optional: borrow from the RAVA lend pool
You do not need to use leverage. If you want to size up without posting the full amount, toggle RAVA leverage in the acquire flow. RAVA quotes an offered loan to value for the position. You post the difference as collateral. The lend pool funds the loan.
The loan accrues interest for the holding period plus a small origination fee. RAVA takes a share of the realized profit. If the trade loses money, the pool absorbs the loss alongside your collateral.
How liquidations differ by venue
The mechanics are not the same on Aave, Morpho, and Euler. Three things change.
Trigger
Aave v4. A position is liquidatable when its health factor drops below 1.0.
Morpho. A position is liquidatable when its LTV exceeds the market's LLTV.
Euler. A position is liquidatable when risk adjusted collateral value falls below debt value. This is mathematically equivalent to a health factor under 1.0.
Bonus
Aave v4. Dutch auction. The bonus rises as health factor falls. A position at HF 0.85 pays a larger bonus than the same position at HF 0.95. The bonus is dynamic and time sensitive.
Morpho. The bonus is locked to the market's LLTV by min(1.15, 1 / (0.3 × LLTV + 0.7)). An 86% LLTV market pays roughly 5%. The bonus does not move once the market is configured. Liquidators keep the entire amount with no protocol fee.
Euler. Vault creators set a maximum discount parameter. The actual discount scales with how undercollateralized the position is, capped at the vault setting.
Close factor
Aave v4. The liquidator can repay enough debt to bring the health factor back to 1.0. This is often more than the old 50% cap.
Morpho. No cap. Up to 100% of the debt can be repaid in a single transaction.
Euler. Per vault. Each vault sets its own maximum.
Where the profit comes from
Two sources, stacked.
Acquisition discount. Locked in the moment the liquidation lands. This is the venue bonus described above.
NAV gap. RWAs often trade below issuer NAV on chain because secondary liquidity is thin. When a holder redeems with the issuer at the next window, they receive NAV. The gap between the on chain mark and NAV closes for whoever holds the position to redemption.
If you acquire and hold to redemption, you capture both. If you exit on chain immediately, you only capture the venue bonus. Loan interest accrues over the holding period, so the longer the redemption window, the more it eats into the NAV gap.
Lending
If you toggle leverage on, the RAVA pool funds the loan side. You post the rest as collateral. The loan is full PIK. No cash payments while you hold. Interest accrues to principal and is repaid in one settlement at exit.
Full schedule: Rate Mechanism.
Pre liquidation on Morpho
Morpho supports an opt in pre liquidation hook. Markets that enable it allow partial liquidation in the zone between a separate preLLTV threshold and the standard LLTV. The bonus and the maximum repay scale linearly toward LLTV. RAVA labels these positions separately because the math and the cap differ from a standard liquidation.
Risks
Bad debt. If the position is so far underwater that even full liquidation does not cover the debt, lenders on the source venue absorb the residual. RAVA flags rows where this is possible.
Redemption windows. Issuers run monthly or quarterly redemption windows with capacity caps. If the queue is full, the wait extends and loan interest keeps accruing.
Slippage. Secondary liquidity for RWA tokens is thin. Exiting on chain instead of holding to redemption can compress the captured discount.
Race conditions. Bonuses on Aave and Euler scale with health factor. Other liquidators are watching the same positions. The bonus you see is not the bonus you get if someone else fills first.
Loan liquidation. The RAVA loan has its own liquidation price. If the underlying asset value drops below the loan amount before exit, the lend pool can liquidate the position. The acquire flow shows the buffer up front.