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In a lending protocol, how are collateral assets protected when their value decreases or when the value of borrowed assets increases?

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In this guide, you’ll learn the answer to “In a lending protocol, how are collateral assets protected when their value decreases or when the value of borrowed assets increases?” in OverWallet.

In a lending protocol, how are collateral assets protected when their value decreases or when the value of borrowed assets increases?

Question: In a lending protocol, how are collateral assets protected when their value decreases or when the value of borrowed assets increases?

Answer: Liquidation.

Further reading

What is the name of the certificate received in return for providing liquidity to the lending pool in a lending protocol?

What do I receive when I provide liquidity to the pool?

What is Lending Protocol’s lending method?