Liquidation
In DeFi (Decentralized Finance)
Plain English
When borrowed positions are automatically closed because collateral value dropped too low. Like a margin call in traditional trading - if your collateral is worth $1000 and you borrowed $800, if collateral drops to $900, you might get liquidated to protect the lender.
Technical
Automated process of closing undercollateralized positions to protect protocol solvency. When collateral value falls below required thresholds, liquidators can repay portions of debt in exchange for discounted collateral. Liquidation incentives (liquidation bonuses) attract third-party liquidators who maintain system health while profiting from price discrepancies.