Glossary
Liquidation Threshold
The protocol boundary at which a borrowing position becomes eligible for liquidation.
Reviewed as part of On-Chain Credit Health and Liquidation Metrics, using the primary references listed below. Updated 2026-07-24.
Plain-English meaning
Liquidation Threshold is used here to describe the protocol boundary at which a borrowing position becomes eligible for liquidation. In the daily board, the word is grouped by the role it performs rather than by spelling or market popularity.
You may encounter it in a product interface, technical document, risk report, policy paper, or market dashboard. The term is included for recognition and comparison, not as a product recommendation.
Important boundary
It is not necessarily the same as the maximum loan-to-value used when borrowing begins.
When this word appears in a report, identify the mechanism being described before treating the label as a conclusion. Similar terms can point to different causes, controls, or outcomes.
Why it belongs with DeFi Credit Risk
These words explain how overcollateralized lending keeps accounts healthy until prices move.
When solving the puzzle, compare the job this term performs with nearby cards. A correct group usually shares a function, risk type, workflow, or market structure rather than simply sharing similar wording.
Where you might see it
You might encounter this term while reading educational explainers, product documentation, risk disclosures, market dashboards, or beginner guides. Always separate vocabulary learning from financial decision-making.
Reading cue
Explaining why one borrowing position moved toward liquidation
Use the full guide's applied scenario to ask where Liquidation Threshold enters the process, what evidence supports it, and which nearby concept it could be confused with.
Read the complete applied scenarioNearby concepts
Compare before you memorize
Collateral factor
The share of an asset's value that a protocol allows to support borrowing capacity.
It is an asset or market parameter, not the current health of one complete position.Collateral ratio
A comparison between collateral value and the debt or issued value it supports.
A ratio can be displayed in different directions and should be read with its formula.Health factor
A protocol-specific summary of collateral, liquidation thresholds, and debt.
It changes with inputs and rules; it is not a universal credit score.Knowledge check
Check the distinction
Why should two protocols' health factors not be compared without documentation?
They may use different formulas, asset parameters, oracle inputs, thresholds, and liquidation processes.
Source trail
References behind this explanation
These references support the surrounding guide and concept boundaries. Open the full source when you need the original technical or policy context.