The true test of a financial system has never been during peaceful times. Only those systems that can survive "black swan" events are truly resilient.

Managing stablecoin lending protocols with billions in assets, the most common concern among users is: in the event of a crash like March 12, 2020, or the extreme market collapse of LUNA in 2022, will the system collapse outright? History cannot be replayed, but we can analyze its public mechanisms to see which designs are truly protecting users.

Let's consider an extreme scenario: Bitcoin and Ethereum are halved within 24 hours, market panic selling causes liquidity to evaporate instantly. How does the system withstand?

**The first line of defense comes from the collateralization ratio.** Most protocols require a minimum collateral ratio of over 150%, with many users proactively raising it to 200% or higher. This means that only when the collateral value drops by more than 33%-50% will liquidation be triggered. In a halving scenario, only those positions that greedily maintain the minimum collateral ratio will be liquidated first, while most cautious positions still have buffer space.

**The second line of defense is the liquidation mechanism.** When a position hits the liquidation threshold, the system auctions off the collateral to repay the debt. The key here is—liquidation is not a panic sell, but an auction with a discount. Liquidators can profit from the discount, and as long as there is room for profit, they are incentivized to participate, acting as liquidity backstops for the market. Even if prices plummet, risks can be managed in an orderly manner, avoiding a cascade of forced sales.

**The third line of defense involves oracles.** In extreme market conditions, delays in price data can become critical triggers for risk. If oracles react too quickly, they might execute liquidations at the most illiquid moments, exacerbating the risk. A reasonable delay design provides liquidators with enough reaction time, giving the market a chance to regain rationality.