Krutika Adani
The selling of a borrower’s collateral to recover a loan is known as DeFi Liquidation.
This selling takes place when the value of the collateral is about to fall below the value of the loan.
With every DeFi loan, there is a threshold or margin that protects the loan giver in case of default.
The difference between the loan (lower value) and the collateral (higher value) is known as threshold or margin.
Another factor that triggers DeFi Liquidation is the default of a loan.