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How Do Liquidation Mechanisms Work for f-NFT Collateralized Loans?

When collateral value drops, the smart contract triggers an automated auction to sell the f-NFT fractions to repay the loan, protecting the lender.
Greeks.Live15.11.25

How Do Liquidation Mechanisms Work for f-NFT Collateralized Loans?

If the value of the f-NFT collateral drops below a predetermined threshold, the smart contract triggers a liquidation process. The mechanism often involves an automated auction where the collateral (the f-NFT fractions) is sold to repay the outstanding loan.

This process can be complex due to the potential illiquidity of the f-NFT fractions. The goal is to repay the lender while minimizing loss to the borrower.

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