What Happens If the Collateralization Ratio Falls below a Minimum Threshold?

If the ratio drops below the minimum threshold (e.g. 150% to 149%), the position becomes vulnerable to liquidation.

The smart contract marks the position for liquidation, allowing anyone to purchase the collateral at a discount to repay the outstanding stablecoin debt. This action closes the under-collateralized position, ensuring the stablecoin remains fully backed.