Formula and accounting assumptions
Collateral value reaching the liquidator equals repaid debt × [1 + bonus × (1 − protocol bonus share)]. Multiply that value by one minus the sale discount to estimate proceeds. Subtract repaid principal, the funding fee on principal and fixed costs. The break-even sale discount is one minus total repayment and costs divided by collateral value received, expressed as a percentage. A negative threshold means even an undiscounted sale does not cover costs.
Worked hypothetical example
Suppose repayment is $1,000, the bonus is 10%, and the protocol receives 20% of that bonus. The liquidator's collateral value is $1,080. Selling at a 5% discount produces $1,026. A 1% funding fee adds $10 to repayment, and $10 of fixed costs bring total costs to $1,020. The modeled net result is only $6. A slightly worse sale price can therefore consume most of what initially appeared to be a generous bonus.
Interpret the scenarios and limits
This is an execution budget under user-entered prices, not a guaranteed opportunity or a live liquidation scanner. Eligibility, available collateral, close factors, competing liquidators, oracle timing and transaction reverts remain external. The fixed-cost field should include the costs relevant to the scenario rather than gas alone. Failed attempts and adverse price movement can produce additional losses. Compare the break-even haircut with a realistic unwind assumption instead of reading the bonus percentage as spendable profit.