Collateral vs Liquidation

Quick comparison to help you distinguish these two crypto terms.

Collateral
beginner
fundamentals

Collateral is cryptocurrency or other digital assets locked or deposited as security to guarantee performance of obligations, enable borrowing, or participate in blockchain protocols like staking and DeFi lending.

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Liquidation
intermediate
risk

The forced closure of a leveraged trading position by an exchange or protocol when losses erode the deposited collateral to a critical threshold, preventing the position from going into negative equity.

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