Collateralization Ratio Maintenance

Collateralization ratio maintenance refers to the ongoing monitoring and adjustment of the value of assets deposited as security relative to the value of the debt issued. Protocols require users to maintain a specific ratio to ensure that even if the collateral value drops, the loan remains backed.

If the ratio falls toward the threshold, the protocol may issue margin calls or initiate automated liquidation procedures. Maintaining these ratios is fundamental to the stability of over-collateralized stablecoins and lending markets.

It involves continuous price oracle updates and real-time risk assessment to prevent insolvency.