When the bull market is raging, everyone is showing off their returns and talking about doubling their investments, and no one really cares whether the protocol is reliable. But there's an old saying in the crypto world — the bear market is the true test, and the moment you see clearly.

Take a well-known stablecoin protocol as an example. Its collateral is a staking derivative, which is essentially a high-volatility asset. At first glance, the interest rate looks good, but the real risk lies in the liquidation mechanism — this thing is like a fire extinguisher, ignored most of the time, only to realize its effectiveness when a crisis hits.

Let's simulate an extreme scenario: mainstream cryptocurrencies are halved in value within a day, the market plunges into panic, on-chain DEX liquidity dries up severely, and slippage skyrockets. Positions with collateral ratios close to the warning line are directly liquidated. But here’s the problem — liquidators are also afraid, no one dares to buy the distressed assets, and the auction prices are far below market value. The more pressure on liquidation, the sharper the price drops, creating a vicious cycle.

Even more dangerous is that derivatives may become unanchored, with trading prices falling below their actual net asset value. This can trigger a chain reaction, turning safety reserves into bad debt instantly, and the protocol’s stablecoins also lose trust.

Fundamentally, relying on a single collateral type is indeed a weakness. To be more resilient, a multi-pronged approach is necessary: diversify collateral types, optimize risk parameters to allow for market fluctuations, and strengthen risk control modules. Liquidation rules should not be too rigid; some buffer space should be left. Ultimately, protocols that collateralize high-volatility assets just to survive have already won; the real winners are those that prioritize risk management.