How Does MakerDAO Manage Different Collateral Types?

MakerDAO manages different collateral types by assigning each a specific set of risk parameters, which are determined by MKR governance token holders. These parameters include a unique minimum collateralization ratio, a stability fee, and a liquidation ratio.

This allows the protocol to accept a diverse portfolio of volatile assets (like ETH, wBTC, etc.) while ring-fencing the risk associated with each. If one collateral type suffers a severe price drop, the liquidation mechanism is triggered for only those vaults.