When I first got into the space, I couldn’t figure this out either.
The liquidation threshold for each type of collateral is generally higher than its loan-to-value ratio, so when you borrow up to the limit, there’s still a buffer before liquidation.
On-chain lending doesn’t involve credit checks. Borrowers are just anonymous addresses, so protocols can only reduce the risk of bad debt by ensuring the collateral is worth more than the loan.
Holders of $AAVE can vote on proposals concerning Aave’s risk parameters.
If anything wasn’t clear, ask me in the comments.
#AAVE
This is not investment advice of any kind. You assume all risks.
The liquidation threshold for each type of collateral is generally higher than its loan-to-value ratio, so when you borrow up to the limit, there’s still a buffer before liquidation.
On-chain lending doesn’t involve credit checks. Borrowers are just anonymous addresses, so protocols can only reduce the risk of bad debt by ensuring the collateral is worth more than the loan.
Holders of $AAVE can vote on proposals concerning Aave’s risk parameters.
If anything wasn’t clear, ask me in the comments.
#AAVE
This is not investment advice of any kind. You assume all risks.
