The Downside to DeFi---Liquidation

The DeFi platforms, such as Aave, Compound, and Maker are great for lending. However, with great reward usually comes great risk.

$25M in asset positions were liquidated on Monday due to the 15% price drop of ETH to $1655, which have since slightly corrected upward. Compound saw the highest hit liquidations at about 57% worth $13.6M. Gas prices are also the likely contributor to this as even for "basic" transactions, it was costing $30, and, speaking from experience, I can tell you I've seen some closing positions on other platforms like Maker cost me hundreds if not even thousands!

But this is the issue that some people, especially new to the DeFi programs and the ability to obtain overcollateralized loans just don't get. This should be a warning for those wishing to enter. Be prepared to see and spend high dollars for gas to move any money on any ETH-built smart contact and/or protocol. Also, be prepared to see a small dip potentially kill your positions, costing you more in liquidation penalties.