Health Factor
A single number showing how close a borrowing position is to liquidation, where falling to one means it can be liquidated.
The number is calculated from the value of the collateral, weighted by each asset's liquidation threshold, divided by the value of the debt. It updates continuously as oracle prices change, so it can fall without the borrower doing anything at all. A borrower raises it by repaying debt or adding collateral, and lowers it by borrowing more or withdrawing collateral. Naming varies between protocols, which use terms such as health ratio, risk factor, or margin ratio for the same idea, so a figure from one protocol should not be compared directly with another.
In de praktijk
A position with a health factor slightly above one is a small oracle price update away from becoming eligible for liquidation.
Het veelvoorkomende misverstand
A comfortable reading now is not durable; because it is computed from live prices, a health factor can fall through the threshold within a single volatile block.