@l847852kgbfjf
What is the role of cTokens or stETH in restaking liquidation risk?
cTokens (from Compound) and stETH are the primary collateral assets in the restaking leverage cycle, making them central to liquidation risk. An operator deposits stETH into a lending protocol to borrow a stablecoin, which they use to buy more stETH to restake, thus creating leverage. The health of this entire position depends on the price stability of stETH. If stETH's price drops due to a market-wide event or a problem with Lido, the value of the collateral falls, pushing the loan's LTV ratio toward the liquidation threshold. Because stETH is used as collateral across DeFi, a price drop triggers a systemic event, making it the linchpin in a potential network-wide liquidation cascade.
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