#openledger $OPEN Web3 loans are secured by crypto collateral, and liquidation happens automatically when the collateral value drops below the required threshold. If the market falls sharply and the loan becomes undercollateralized, the protocol sells part of the collateral to protect lenders and maintain platform stability. This process is managed by smart contracts without needing a bank or middleman. Popular DeFi platforms like Aave and Compound use health factors and loan-to-value ratios to
determine liquidation risk. To avoid liquidation, borrowers usually maintain extra collateral, monitor market volatility, or repay part of the loan on time.
determine liquidation risk. To avoid liquidation, borrowers usually maintain extra collateral, monitor market volatility, or repay part of the loan on time.