Decentralized lending makes money accessible without banks. But how does it stay safe? Borrowers must deposit more value than they take out. This is over-collateralization. Imagine you want to borrow 1,000 stablecoins. You lock 1,500 worth of $ETH . That 50% extra is your safety margin. Why? Crypto markets move fast. If $ETH drops 30%, your collateral might be worth less than your debt. Smart contracts monitor this 24/7. When your collateral value falls below a specific threshold, a liquidation event triggers. Liquidators are users who step in. They repay your debt using cheaper collateral and receive your locked assets as a reward. This mechanism protects the platform from bad debt. It turns market volatility into a business opportunity for liquidators. For borrowers, this means understanding liquidation prices. Set alerts. Never borrow close to the limit. Keep a healthy buffer. For lenders, over-collateralization acts as an insurance policy. You earn yield because you hold extra value. It is a decentralized risk management system. Understanding these mechanics helps you navigate DeFi with confidence. The protocol relies on economic incentives rather than trust. DeFi #Lending