RISKS & SECURITY

Liquidation (Collateral Liquidation)

Definition

Liquidation occurs when a borrower's collateral value falls below the required threshold, triggering automatic sale of collateral to repay the loan and protect lenders.

Example

💡 Example

If your ETH collateral drops in value and your loan becomes undercollateralized, the protocol will liquidate your ETH to repay the loan.

Risks to Consider

⚠️ Risks
  • Loss of collateral
  • Liquidation penalties
  • Price volatility

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