How to Calculate Your Position's Health Factor

Detailed Instructions

First, you must retrieve the current state of your position from the protocol's smart contract or interface. The Health Factor is a ratio that indicates the safety of your borrowed position; a value below 1 risks liquidation. You need the total borrowed value (in USD) and the total collateral value (in USD). For each asset, you require its current market price, the amount you have supplied as collateral, and the amount you have borrowed. Also, note the Loan-to-Value (LTV) ratio for each collateral asset, which is the maximum percentage of its value you can borrow against.

• Sub-step 1: Connect your wallet (e.g., MetaMask) to the protocol's app (app.aave.com) or a blockchain explorer.
• Sub-step 2: Identify your position by your wallet address (e.g., 0x742d35Cc6634C0532925a3b844Bc9e...).
• Sub-step 3: For each asset (e.g., ETH, USDC), record your supplied balance, borrowed balance, and the asset's current USD price from an oracle.
• Sub-step 4: Note the specific LTV for each collateral type from the protocol's documentation (e.g., ETH might have a 75% LTV).

Tip: Use the protocol's getUserAccountData function on a block explorer to fetch this data in one call for efficiency.

Detailed Instructions

Your total collateral value is not simply the sum of your supplied assets' market values. It is the sum of each collateral asset's Liquidation Threshold-adjusted value. The Liquidation Threshold is a percentage (usually lower than the LTV) at which your position becomes eligible for liquidation. For accurate health factor calculation, you must use the Liquidation Threshold, not the maximum LTV. Multiply the amount of each collateral asset by its current USD price and then by its liquidation threshold percentage.

• Sub-step 1: For each collateral asset, calculate: (Collateral Amount) * (Asset Price) * (Liquidation Threshold).
• Sub-step 2: Example: If you supplied 10 ETH at $3,000/ETH with an 80% liquidation threshold: 10 * 3000 * 0.80 = $24,000.
• Sub-step 3: Sum all adjusted values from every collateral asset in your position to get the Total Adjusted Collateral Value.

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// Example calculation for two assets:
let totalAdjustedCollateral = 0;
totalAdjustedCollateral += (10 * 3000 * 0.80); // ETH
totalAdjustedCollateral += (5000 * 1.00 * 0.85); // USDC
// totalAdjustedCollateral = $24,000 + $4,250 = $28,250

Tip: Always verify the current liquidation thresholds on the protocol's risk parameters page, as they can be updated by governance.

Detailed Instructions

The total borrowed value is the sum of the current USD debts for all borrowed assets. Crucially, this must include accrued interest, as most loans use variable or stable interest rates that compound. The debt increases over time, which directly lowers your Health Factor. You can find your current debt balance, which includes interest, directly from the protocol's user interface or by querying the smart contract for your totalDebtETH or similar function.

• Sub-step 1: For each borrowed asset (e.g., DAI, USDT), obtain your current debt balance from the protocol. This is your principal plus interest.
• Sub-step 2: Multiply each debt balance by its current USD market price. For stablecoins, this is typically ~$1.
• Sub-step 3: Sum the USD values of all debts to get the Total Borrowed Value.

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// Example with two borrowed assets:
let totalBorrowedValue = 0;
totalBorrowedValue += (1500 * 1.00); // 1500 DAI at $1.00
totalBorrowedValue += (0.5 * 3000); // 0.5 ETH at $3,000
// totalBorrowedValue = $1,500 + $1,500 = $3,000

Tip: Interest accrues every block. For precise calculations, especially near the liquidation threshold, use real-time data from the blockchain, not cached UI data.

Detailed Instructions

The Health Factor (HF) is calculated as: HF = (Total Adjusted Collateral Value) / (Total Borrowed Value). This formula shows how over-collateralized your position is. An HF of 2.0 means your adjusted collateral is twice your debt. If the HF drops to 1.0 or below, your position becomes eligible for liquidation by keepers. Market volatility can cause HF to fluctuate as asset prices change.

• Sub-step 1: Divide the Total Adjusted Collateral Value (from Step 2) by the Total Borrowed Value (from Step 3).
• Sub-step 2: Interpret the result: HF > 1.5 is generally safe, HF between 1.0 and 1.5 is risky, and HF <= 1.0 is in liquidation territory.
• Sub-step 3: Monitor this value regularly. You can increase your HF by adding more collateral or repaying some debt.

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// Using the example values from previous steps:
let healthFactor = 28250 / 3000; // $28,250 / $3,000
// healthFactor = 9.4167

In this example, the HF is 9.42, indicating a very safe position. However, if ETH's price dropped to $2,000, the adjusted collateral would become $16,000 (for ETH) + $4,250 (USDC) = $20,250, resulting in an HF of 20250 / 3000 = 6.75. A more drastic drop could bring it near 1.

Tip: Set up alerts using DeFi monitoring tools to notify you if your Health Factor falls below a threshold you define, such as 1.5.

Detailed Instructions

Begin by querying the blockchain for the real-time state of your position. This requires accessing the specific lending protocol's smart contracts. For Aave V3 on Ethereum Mainnet, you would interact with the Pool contract at 0x87870Bca3F3fD6335C3F4ce8392D69350B4fA4E2. You need to fetch two core data sets: your supplied collateral assets and your borrowed assets. For each, you must obtain the current market price from a reliable oracle (like Chainlink), the asset's liquidation threshold (the maximum Loan-to-Value ratio before liquidation), and the liquidation bonus (the discount liquidators receive). Use the getUserAccountData function for a summary.

• Sub-step 1: Use a block explorer or direct RPC call to find your wallet's position data in the protocol.
• Sub-step 2: For each collateral token (e.g., 0xC02aaA39b223FE8D0A0e5C4F27eAD9083C756Cc2 for WETH), note the deposited amount and fetch its USD price.
• Sub-step 3: For each debt token (e.g., 0xA0b86991c6218b36c1d19D4a2e9Eb0cE3606eB48 for USDC), note the borrowed amount and its price.

Tip: Automate this with a script using libraries like ethers.js or web3.py, querying at regular intervals (e.g., every block) for continuous monitoring.

Detailed Instructions

The Health Factor (HF) is the cornerstone metric for liquidation risk. It is calculated as HF = (Total Collateral in ETH * Liquidation Threshold) / Total Borrowed in ETH. A value below 1.0 means your position is eligible for liquidation. First, convert all asset values to a common base currency, typically ETH or USD. The liquidation threshold is a percentage (e.g., 80% for WETH on Aave) set by the protocol governance. Multiply your collateral amount by its price and its threshold to get your "borrowing power." Divide this by your total debt value.

• Sub-step 1: For each collateral: Collateral Value_i = Collateral Amount_i * Price_i.
• Sub-step 2: Calculate Adjusted Collateral_i = Collateral Value_i * (Liquidation Threshold_i / 100).
• Sub-step 3: Sum all Adjusted Collateral values. Sum all Debt Value (Debt Amount * Price).
• Sub-step 4: Execute the final calculation: Health Factor = Total Adjusted Collateral / Total Debt.

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// Example calculation for a position with 10 WETH ($2,000 each) and 5,000 USDC debt.
let totalAdjCollateral = 10 * 2000 * 0.80; // 80% LT for WETH
let totalDebt = 5000 * 1.00;
let healthFactor = totalAdjCollateral / totalDebt; // 16000 / 5000 = 3.2

Tip: Always use the most recent price from the protocol's oracle, as stale prices are a major risk.

Detailed Instructions

A raw Health Factor number is meaningless without context. Risk exposure is defined by how close your HF is to the liquidation threshold of 1.0 and the volatility of your collateral assets. Establish personal safety buffers. For example, if your HF drops below 2.0, consider it a yellow alert; below 1.3, a red alert requiring immediate action. You must also monitor the Loan-to-Value (LTV) ratio, which is similar to HF but uses the collateral's maximum LTV (not liquidation threshold). Use monitoring tools like DeBank, Zapper, or custom scripts with alerting via Discord/Telegram webhooks.

• Sub-step 1: Determine your risk tolerance buffer. If the protocol liquidates at HF < 1.0, set your first warning at HF < 1.5.
• Sub-step 2: Calculate the price drop tolerance for your main collateral. For a WETH position with an HF of 2.0, it can drop ~50% before liquidation (1 / HF).
• Sub-step 3: Implement automated alerts using a service like OpenZeppelin Defender Sentinel or a custom cron job that calls your calculation script.

Tip: Correlated asset drops (e.g., ETH and related altcoins) can crash your HF faster than expected. Diversify collateral types if possible.

Detailed Instructions

When your Health Factor warning triggers, you must act swiftly. Risk mitigation involves increasing your HF by either adding more collateral or repaying debt. The most efficient action depends on gas costs and asset availability. Use the protocol's interface or smart contract calls directly. For Aave, you can call supply() on the pool contract to add collateral or repay() to reduce debt. Always calculate the minimum required adjustment to reach your target HF, plus a safety margin.

• Sub-step 1: Add Collateral: Transfer more of your collateral asset (e.g., WETH) to the protocol. This directly increases the numerator in the HF formula.
• Sub-step 2: Repay Debt: Send stablecoins (e.g., USDC) to the protocol to reduce your borrowed amount, increasing the HF by reducing the denominator.
• Sub-step 3: Swap and Repay: If you lack stablecoins, you might need to swap other assets for a stablecoin first, incurring slippage and fee costs.

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// Example: Repaying 1000 USDC debt on Aave V3 via a smart contract call
// Ensure you have approved the pool to spend your USDC first.
aavePool.repay(0xA0b86991c6218b36c1d19D4a2e9Eb0cE3606eB48, 1000e6, 2, msg.sender);

Tip: For large positions, consider using stop-loss mechanisms or decentralized insurance (e.g., Unslashed, Nexus Mutual) to hedge against black swan events.