Liquidation cooldown is a specific time period during which a collateralized position in decentralized finance cannot be immediately liquidated after certain events. This mechanism is implemented in some lending protocols to provide borrowers a brief window to add more collateral or repay a loan, thereby preventing rapid or unfair liquidations. It acts as a protective measure against extreme market volatility or oracle manipulation. The cooldown period aims to reduce cascading liquidations and enhance protocol stability.
Context
News regarding DeFi lending platforms often references liquidation cooldowns in discussions about protocol risk management and user protection. Debates focus on optimizing cooldown durations to balance borrower safety with lender solvency, particularly during periods of market stress. Understanding this feature is important for assessing the robustness and fairness of decentralized financial applications.
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