DeFi · 55 / 86
Lending and liquidation
Lending protocols let you deposit collateral and borrow against it. If the collateral's price falls, the protocol can sell it. That sale is a liquidation. It is automatic, and it is not on your side.
The borrow
You might borrow a stablecoin against a volatile coin. You pay interest. The collateral has to stay above a line. The line is their rule, not your hope.
When the price moves
A fast drop can liquidate you before you wake up. A penalty is added. You do not get to negotiate.
Borrowed money makes the same move hurt more. This course does not teach you how to lever up. It tells you the machine will sell your collateral.
Check yourself
Can you talk a protocol out of a liquidation?
No. If the line is crossed, the sale is the rule.
After this you can name the price at which your collateral would be sold, before you borrow.
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