DeFi | Why does borrowing on-chain require overcollateralization?
When the health factor of a position on Aave falls below 1, liquidators can liquidate it.
When you borrow a stablecoin, liquidation risk mainly comes from the collateral falling in value. When you borrow a volatile coin, a rise in the value of the borrowed coin can also bring the position closer to liquidation.
$AAVE is the governance token of the decentralized lending protocol Aave. Current price: 167.76.
If you're unfamiliar with a product, steer clear for now. It's safer to practice with a small amount first.
#AAVE
When the health factor of a position on Aave falls below 1, liquidators can liquidate it.
When you borrow a stablecoin, liquidation risk mainly comes from the collateral falling in value. When you borrow a volatile coin, a rise in the value of the borrowed coin can also bring the position closer to liquidation.
$AAVE is the governance token of the decentralized lending protocol Aave. Current price: 167.76.
If you're unfamiliar with a product, steer clear for now. It's safer to practice with a small amount first.
#AAVE