Quote from: Derwin2 on Today at 04:30:20 AM

Quote from: Chappas on Today at 03:29:58 AM

Since mortgage assets are affected by price fluctuations, this is very beneficial and may lead to liquidation events, thereby reducing borrowing capacity. By replacing locked assets with assets that are expected to have better market evolution, two matching situations can be avoided.

Liquidation is an important aspect of the DeFi world. Most lending platforms require overcollateralization. An example is the AAVE lending platform, which allows any user to borrow 75% of the current value of any asset locked in its agreement. This means that as asset valuation increases, the "credit limit" for applicable users will also increase. On the other hand, when the value of locked assets declines, liquidation events may occur.

Traditionally, this is done by repaying the loan to unlock the vault and then converting the mortgage assets. By using borrowed funds to close the mortgage position and immediately open a new mortgage position with a different asset, this can be avoided by fast lending