Health factor 1.0 on Aave is the liquidation line. Cross it and bots take over.
When you borrow on Aave, the protocol watches a single number: your health factor. It's the ratio of what your collateral is worth against what you owe. Drop to 1.0 and you're eligible for liquidation. Liquidators can repay part of your debt and seize collateral at a bonus, which comes straight from your pocket.
The thing most borrowers miss is speed. Interest keeps accruing. Markets move in basis points. Oracle updates can swing your position down faster than you see it coming on-chain. A buffer of 1.02 isn't safety. It's a coin flip.
Aave calculates health factor by weighting each asset you hold by its liquidation threshold and collateral factor. A stablecoin gives you more headroom. A volatile token shrinks it. Mix five different collaterals and the protocol compounds the risk across all of them.
Three things move your health factor: price swings on what you hold or owe, interest that stacks up on your borrow side, and occasional governance updates to risk parameters. The first two happen constantly. The third is rare but real. Caps and collateral factors do change.
Oracle cadence matters more than people think. Your visible health factor can look solid one moment and drop sharply on the next price feed update. In volatile windows, that gap between ticks is where positions slip into liquidation territory.
Variable rates compound the problem. If utilization on your borrowed asset spikes, your interest rate jumps. Your debt grows even if prices stay flat. Soft depeg scenarios on stablecoins can push you below 1.0 in minutes.
Running close to the line is cheap use. It's also expensive if you're wrong. A 2-3% buffer on your health factor costs you nothing in normal conditions and saves you everything when markets turn choppy.
This is informational content about how Aave's protocol mechanics work. Not financial advice. Always manage your own risk.
