How Do Lending Protocols Specifically Use Oracles to Calculate Collateralization Ratios? ⎊ Path

How Do Lending Protocols Specifically Use Oracles to Calculate Collateralization Ratios?

Lending protocols use oracles to obtain the real-time market value of both the collateral asset and the borrowed asset. The collateralization ratio is calculated as (Value of Collateral / Value of Loan).

The oracle's price is critical because if the collateral's value drops below a certain threshold (the liquidation ratio), the protocol's smart contract automatically allows for the collateral to be liquidated to repay the loan.

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Explain the Concept of the “Liquidation Ratio” in DeFi Lending

What Is a “Flash Loan” and How Is It Used in Conjunction with Oracle Manipulation?

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How Do Decentralized Lending Protocols Use Oracles for Liquidation of Collateral?

What Is the Difference between “Soft Liquidation” and “Hard Liquidation”?