Health Factor Management

Ouija Protocol uses a dynamic health factor (HF) to maintain the pool's health and mitigate liquidation risks. The health factor is calculated as the ratio of the total available borrowing power (BP) to the total valuation of the pool. A higher HF indicates a healthier pool, while a lower HF signals increased risk.

Ouija's slippage mechanism incorporates the HF to ensure that swaps with a significant impact on the pool's health are charged higher slippage fees. This approach discourages high-risk swaps and incentivizes arbitrageurs to balance the pool by executing reverse swaps, ultimately maintaining the pool's health and minimizing liquidation risks.