The liquidation mechanisms of decentralized finance (DeFi) protocols are designed to protect lenders by selling collateral when its value falls below a threshold, but their robustness is debated. Overcollateralization and automated liquidations via smart contracts ensure rapid response to price volatility, as seen in protocols like Aave and Compound. However, vulnerabilities exist: price oracle errors, flash loan attacks, and liquidation spirals can destabilize systems, as evidenced by MakerDAO’s $8.32M loss in 2020 and Compound’s $89M erroneous liquidations. Innovations like Miqado’s reversible call options aim to mitigate spirals by allowing debt rescue time. While DeFi’s transparency and automation offer advantages over traditional finance, reliance on oracles and high volatility expose risks. Robustness requires improved oracle reliability, diversified collateral, and regulatory clarity.