Collateral Requirement Manipulation

Collateral requirement manipulation refers to the act of changing the rules governing how much collateral is required to back a loan or a derivative position within a protocol. If an attacker gains control of governance, they might lower these requirements to extract capital or raise them to liquidate specific users.

This type of manipulation is a significant risk in decentralized lending and derivatives platforms, where the integrity of the collateralization ratio is essential for system stability. It highlights the intersection of governance and protocol physics, as the change directly impacts the risk profile of the entire system.

Understanding how these parameters are adjusted is vital for users to protect their positions from predatory governance actions.