To ensure there is always enough collateral to cover the value of all outstanding debt (the amount of dX outstanding), any Vault deemed too risky (according to parameters established by the DEIP Network) is liquidated through an automated liquidation auction. The Protocol makes the determination after comparing the Liquidation Ratio to the current collateral-to-debt ratio of a Vault. Each Vault has its own Liquidation Ratio based on the assets stored in it and the risk profile of the particular collateral asset type. Once liquidation auction is triggered, a special liquidation smart contract takes a percentage of the assets pool (F-NFTs pool) in the Vault and puts it on auction, separately it puts assets from the “Stabilization assets pool” on the liquidation auction. From the F-NFTs pool, the protocol takes a percentage of the pool (determined by risk-assessment smart contract based on the currency governance configuration) and splits it into two auction slots of two different types: “pooled” and “segregated”. Pooled slots contain a percentage of all the assets from Vault F-NFTs pool into a single slot, and in case it’s bought it provides immediate price discovery for the Vault F-NFTs assets. Segregated slots are created for each N-NFT in the Vault. The percentage is the same for each F-NFT and determined by liquidation smart contract based on current on-chain governance settings. Segregated slots give more accurate price discovery, but take more time to be liquidated on the market. Once the liquidation is performed, the liquidation smart contract estimates the new price of assets in the Vault and the risk coefficients. In case the total weighted value of the Vault is greater than the value of borrowed assets multiplied by the collateralization coefficient, it stops the liquidation process, if not - it launches the next iteration and does the whole process again, this time with a bigger share of Vault assets. The percentage of each liquidation iteration () is , where is liquidation step multiplication coefficients, is a default liquidation percentage, both set by the on-chain governance mechanisms.