The overall stability of the Shroomy Protocol relies heavily on the robustness of the collateralized positions within the ecosystem, which is measured by what we call the health factor. When a user’s account falls below a health factor of 1, the position becomes eligible for liquidation. In the event that an account’s health factor drops below the threshold of 1, any external party can initiate a liquidationCall() function to either the Pool or L2Pool contract (for Layer 2 networks). This process allows the liquidator to repay a portion of the outstanding debt and receive discounted collateral in return, known as the liquidation bonus.
The profitability of a liquidation call depends significantly on current gas prices in the network. If gas costs are elevated, the potential profit from the liquidation bonus may be negated by the transaction expense.