# Liquidations (LVF)

Liquidation is the mechanism by which the protocol reclaims borrowed funds when a user’s position becomes too risky. In Peapods, all leveraged positions are backed by LP tokens containing both a volatile asset (pTKN) and a paired base asset. This collateral model enables a safer liquidation process whereby half of the position already consists of the required debt asset to be repaid. This protects both lenders and borrowers from excessive downside during the liquidation process.

By enforcing a conservative **83.33% Loan-to-Value (LTV)** threshold, Peapods ensures that positions are liquidated **before** they become undercollateralized. Liquidators are economically incentivized to repay debt in exchange for discounted collateral, while borrowers retain any remaining equity after the position is resolved. The use of paired-asset LPs creates natural buffers that allow the system to absorb volatility without generating bad debt.

Liquidators may carry out a partial liquidation in which they choose to liquidate only a portion of the position if full liquidation would be unprofitable due to slippage. The remaining collateral can be unwound in follow-up transactions once price stabilizes or arbitrage corrects the market.

 Since part of the debt is always covered by the stable paired asset, the protocol remains solvent even if pTKN experiences moderate post-liquidation price slippage.

<br>


---

# Agent Instructions: Querying This Documentation

If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter:

```
GET https://docs.peapods.finance/liquidations-lvf.md?ask=<question>
```

The question should be specific, self-contained, and written in natural language.
The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.