Decentralized Finance (DeFi)

Liquidation

When a loan or leveraged position is forcibly closed, and collateral is sold, because its value has fallen too far. In DeFi, third parties trigger it for a bonus, and the borrower loses part of their collateral as a penalty.

General education, not investment, legal or tax advice. Markets and regulation change quickly: where a definition depends on current law or on a recent event, check the latest coverage before relying on it.