When I first got into DeFi lending, the biggest question in my mind was: Are the collateralized tokens really safe? Could they be wiped out instantly? This concern kept bothering me for a long time, until I gradually understood the logic behind it. Today, I’ll break down this reasoning.

Simply put, your tokens are not "handed over" to a platform, but are locked inside a smart contract that is written in stone. This contract is like a written agreement with clear terms: how much you collateralize, how much you can borrow, when liquidation will occur—all are transparent. As long as the contract has no vulnerabilities (which relies on professional audits and market experience to verify), the assets will operate strictly according to the rules.

Another key protective mechanism is over-collateralization. In simple terms, you cannot borrow 1:1 with your tokens; you must collateralize more value to borrow stablecoins. This way, even if the market crashes and the collateral depreciates, there is enough buffer in the system to prevent a sudden collapse. Plus, your private keys are always in your control, allowing you to repay or withdraw collateral at any time (as long as the health ratio doesn’t fall below the bottom line). This autonomy is something centralized exchanges cannot provide.

That said, risks do exist. But the real danger is not asset theft, rather extreme market volatility. During a rapid market decline, your collateral value can plummet sharply. Once it hits the liquidation threshold, your position will be forcibly liquidated. So, ultimately, the decision on safety lies in your hands—mainly how you set your collateral ratio and manage your positions.

See, this method of entrusting everything to code with maximum transparency—compared to putting your tokens into a centralized exchange’s black box— which one do you think is more reassuring?