Automated liquidations are the forced closing of collateralized positions in decentralized finance (DeFi) protocols when a borrower’s collateral value falls below a predetermined threshold. These actions are executed by smart contracts without manual intervention. This mechanism protects lenders by ensuring their loans remain sufficiently collateralized. It operates swiftly to mitigate risk within volatile digital asset markets.
Context
Automated liquidations are a recurring subject in crypto news, particularly during periods of significant market volatility. Reports often analyze the volume of liquidated positions and their impact on market prices. Understanding these events helps users assess the risk associated with DeFi lending and borrowing platforms. The efficiency and fairness of these automated processes are frequently debated among protocol developers and users.
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