Borrowing in DeFi depends on one simple mechanism: you put up something valuable as collateral, and the protocol lets you borrow against it. Because the value of that collateral can move up or down, the system needs a way to keep everything stable. That’s where liquidations come in. When the market drops and your collateral no longer covers the amount you borrowed, the protocol automatically sells part of it to keep the loan safe. This is the mechanism that balances every major lending protoc...

Borrowing in DeFi depends on one simple mechanism: you put up something valuable as collateral, and the protocol lets you borrow against it. Because the value of that collateral can move up or down, the system needs a way to keep everything stable. That’s where liquidations come in. When the market drops and your collateral no longer covers the amount you borrowed, the protocol automatically sells part of it to keep the loan safe. This is the mechanism that balances every major lending protoc...