Definition ∞ A defect in the automated process designed to sell collateral when a loan’s value falls below a predetermined threshold. Such a flaw can result in inefficient liquidations, cascading market effects, or the inability to recover loan principal, causing significant losses for protocols and users.
Context ∞ Liquidation mechanism flaws pose substantial risks to decentralized finance lending platforms. Events like network congestion or oracle manipulation can expose these weaknesses, leading to significant financial instability and a loss of confidence in the protocol’s design.
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