If your position in a certain DeFi lending protocol is approaching the liquidation threshold, instead of passively waiting for the system to forcibly liquidate, it's better to take control proactively. Here is a three-step strategy that might help you preserve some funds.

First, immediately trigger a liquidation auction yourself. Don't wait for the system to liquidate you; actively liquidating yourself can actually earn you Gas reimbursement rewards—this is an incentive from the protocol for you to actively manage risk. It may sound counterintuitive, but this is the logic of DeFi.

Next, your collateral will enter a Dutch auction process. The auction price depends on market conditions and buyer enthusiasm. If the market happens to be favorable or someone actively bids, the auction price could be more favorable than you expected.

The final step is to wait for the auction to end. If, after deducting debts, there is a surplus remaining from the sale, this money will automatically be returned to your wallet. Although the original position is indeed gone, through proactive operation, you not only recover part of the residual value but also gain additional Gas fee compensation. In comparison, being ruthlessly liquidated by the system can cause greater losses.

In the DeFi world, the speed of information and action determines how much you can recover. Those who know these details often turn a bad situation into a relatively manageable outcome.