Part 7/10:
Liquidation and Valuation Mechanics
An essential aspect of tokenized assets in DeFi is understanding liquidation preferences. For tokenized Tesla, the liquidation floor is set at one-hundredth (1/100th) of Tesla’s current price. For instance, if Tesla’s stock trades at $450, then tokenized Tesla’s liquidation value is $4.50.
This valuation acts as a safety net, ensuring that in extreme scenarios—such as a liquidation event—the tokenized Tesla will not fall below this minimum value. It’s overcollateralized by LEO on the balance sheet to support this guarantee.