Collateralization Floor

The collateralization floor is the minimum ratio of collateral to debt required by a protocol to maintain a position. If a user's collateral ratio drops below this floor, the position is considered under-collateralized and becomes eligible for liquidation.

This floor is set by protocol governance and is a critical parameter for managing systemic risk. It defines the absolute limit of the platform's risk tolerance.

The floor is typically higher than the liquidation threshold to provide a warning zone. By establishing a clear floor, the protocol provides predictability for users and liquidators.

It is a foundational element of the protocol's risk management architecture. Traders must maintain their positions above this floor to avoid forced closure.

It represents the boundary between a healthy, active position and a failed one.