Protocol liquidation is the automatic process within a decentralized finance lending protocol where a borrower’s collateral is sold to repay their outstanding loan. This occurs when the collateral’s value falls below a predetermined threshold, ensuring the solvency and stability of the lending pool. It is a critical risk management feature.
Context
News in the DeFi sector often reports on large-scale protocol liquidations during periods of significant market volatility, affecting numerous users and potentially influencing broader market prices. Understanding these events is vital for assessing risk exposures in decentralized lending and borrowing activities. These liquidations maintain system health.
The custom application chain architecture natively merges trading, lending, and stablecoins, establishing a single-chain liquidity environment for superior capital efficiency.
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