LIF

Liquidation Incentive Factor

The Liquidation Incentive Factor (LIF), as implemented in both Morpho and Fira, represents the economic reward available to liquidators when closing under-collateralized positions. We use this as a core input in determining how much capital can safely be allocated to a given market. Higher LIFs generally support larger caps, as they provide stronger incentives for third-party liquidators to act quickly and reliably.

$$LIF = max\left[\frac{1}{0.7 + 0.3\times LLTV},\space 1.15\right]$$

See Morpho Documentation for further explanation.