No one called in the loan, so why was the collateral for an on-chain loan suddenly liquidated?
Here’s how I understand it: liquidations are mostly carried out by automated programs. They constantly monitor on-chain positions and immediately submit a liquidation transaction when the health factor drops below 1.
Take Aave, for example: when a borrowing position’s health factor falls below 1, anyone can initiate a liquidation as a liquidator.
What I do: proactively repay the loan or add collateral. This usually results in a smaller loss than waiting to be liquidated, since liquidation incurs an additional penalty.
$COMP is the governance token of the lending protocol Compound.
Here’s how I understand it: liquidations are mostly carried out by automated programs. They constantly monitor on-chain positions and immediately submit a liquidation transaction when the health factor drops below 1.
Take Aave, for example: when a borrowing position’s health factor falls below 1, anyone can initiate a liquidation as a liquidator.
What I do: proactively repay the loan or add collateral. This usually results in a smaller loss than waiting to be liquidated, since liquidation incurs an additional penalty.
$COMP is the governance token of the lending protocol Compound.
