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Liquidation Call Meaning

(Also known as a Margin Call). A notification from an exchange or a lending protocol that your collateral has dropped below the "Maintenance Margin" and that your position is at risk of being liquidated.

When you receive a liquidation call, you have two choices: (1) Add more collateral (inject more cash) to lower your "Liquidation Price," or (2) Close part or all of your position. If you do nothing and the price continues to move against you, the system will automatically liquidate your assets.

In decentralized lending protocols like Aave, there is no "email" for a margin call. The system is entirely automated.

Third-party "Liquidators" monitor the health of every loan; as soon as a loan’s collateral value drops too low, the liquidator pays off the debt and takes a "bonus" from the user’s collateral as a reward. This ensures the protocol always remains solvent.

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