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Define ‘Liquidation’ in the Context of Decentralized Stablecoins

Automated seizure and sale of collateral when its value drops below a set threshold to protect the stablecoin's solvency and peg.
Greeks.Live23.11.25

Define ‘Liquidation’ in the Context of Decentralized Stablecoins.

Liquidation is the automated process by which a decentralized stablecoin protocol closes a user's collateralized debt position (CDP or vault) if the value of the collateral drops below a pre-defined threshold. The collateral is seized and sold on the open market to cover the minted stablecoins, protecting the system's solvency and the peg.

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