The second phase of a major exchange's DeFi activity has become popular, and the rules are very simple—deposit at least 100USDT in a certain lending protocol to participate in a 400,000USDT prize pool Dividend.

Sounds good? Indeed, but the premise is not to be liquidated.

This is the real pit. Once the health index falls below 1, the system will automatically sell some of your collateral to repay the debt, and you will incur a 10% penalty. In other words, if you need to settle a debt of 1000, you will actually have to pay 1100 to get out.

How would I know? A blood and tears history. I borrowed BNB to participate in a certain TGE before, and as a result, I was caught up by the liquidation mechanism of a certain protocol, and a 5% penalty deducted more than 250 dollars. At that moment, I finally understood – the profits from farming are simply not enough to cover the penalties.

So, participating in such activities is fine, but don't let liquidation, this invisible killer, trip you up. Calculate the collateral ratio properly and leave enough buffer, that's the correct approach.