Historical retrospective · DeFi
Maker vaults made liquidation an explicit part of on-chain credit
Maker’s collateralized-debt design requires vaults to maintain risk thresholds; if collateral value falls below configured limits, liquidation processes can repay debt.
Automated liquidation protects system solvency by encoding risk controls into protocol execution.
The mechanism made credit risk visible and programmable, while exposing borrowers to market moves and execution costs.
Before borrowing, users need to understand collateral ratios, liquidation penalties and oracle assumptions—not just the displayed interest rate.
Primary source
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