What is Minimum Collateralization Ratio (MCR)?

The minimum collateralization ratio (MCR) is the minimum ratio of debt to collateral that will not trigger liquidations, which can occur when the price of an asset rises such that the collateral no longer exceeds the set MCR. For example, imagine a user initially deposited $2,000 USD to create an asset worth $1,000 USD (a collateralization ratio of 200%). If the price of the asset then rose above $1.50, the collateralization ratio would decrease below 150% and the position would be liquidated.