# Health Factor (HF)

The Health Factor (HF) is the protocol’s built-in safeguard that continuously measures the solvency of every Operator within each vault.\
It ensures that Curator vault capital remains protected at all times by determining when an Operator may self-stabilize through a [Position Rollover](/capital-access-and-protection/risk-mitigation/position-rollovers.md) and when the protocol must restore the vault through a [Bounded Liquidation](/capital-access-and-protection/risk-mitigation/bounded-liquidations.md).<br>

$$HealthFactor(HF)=Σ(V  i ​  ×(1−h  i ​  ))/L$$

Where:

* **Vᵢ** = USD value of each risk-buffer component (unutilized vault asset, delegated YODL, taker tokens held)
* **hᵢ** = haircut applied to each component
* **L** = curator principal currently utilized for execution

Haircut Schedule

| Asset Type                    | Typical Haircut | Rationale                         |
| ----------------------------- | --------------- | --------------------------------- |
| Stablecoins (USDT / USDC)     | 0–1%            | Low volatility / high liquidity   |
| ETH / WBTC / blue-chip assets | 5–10%           | Moderate volatility               |
| Delegated YODL                | 15–20%          | Governance-controlled risk buffer |

HF represents the relationship between the Operator’s total backing assets and the Curator capital they have deployed:

* HF > 1.0 — The vault is fully solvent; the Operator’s backing assets comfortably cover all liabilities.
* HF = 1.0 — The vault is at its minimum safety threshold; rollovers may be used by the Operator to rebalance exposure.
* HF < 1.0 — The vault has entered the restoration zone; a bounded liquidation restores vault principal in full.

Curators don’t need to monitor HF or take any action.\
The system tracks it on-chain in real time, ensuring that:

* Curator principal remains intact, even if an Operator’s position weakens.
* Restoration mechanisms are applied automatically within each affected vault.
* Transparency is maintained — HF values can be viewed anytime through the vault dashboard.


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