Recently, while researching stablecoin protocols, I found the USDf project quite interesting.

It focuses on two main features: over-collateralization + no forced liquidation. Sounds great, right? But here’s the issue—how much should this “over” actually be set at?

Set it too low, and the protocol could blow up at any time; set it too high, and your capital efficiency is terrible—might as well just put your money in a bank and earn interest.

Falcon Finance’s answer is: let the collateralization ratio “breathe” on its own. They created something called dynamic OCR (Over-Collateralization Ratio), which basically means the safety line automatically adjusts based on market conditions.

**Why is this needed?**

You can think of the traditional fixed liquidation line as a tightly stretched rubber band—any slight price fluctuation and it snaps, and then your position gets mercilessly liquidated.

Dynamic OCR is more like a boxer who actively dodges punches. When the market is stable, it relaxes (lowers collateral requirements, increasing capital efficiency); when there’s extreme volatility, it instantly tightens its defense (raises the collateral ratio, strengthening the safety buffer). The whole process doesn’t require you to do anything manually—the protocol senses risk and reacts automatically.

**How does it actually work?**

When market risk indicators rise—for example, if a collateral asset suddenly becomes highly volatile, or there’s widespread market panic—the system automatically increases the collateral requirement. Note, this doesn’t immediately liquidate you; instead, it asks you to add more collateral to cover the increased risk exposure.

The core logic here is: rather than waiting for the liquidation line to be triggered and taking the hit passively, it’s better to proactively reinforce defenses during the risk accumulation stage. It’s like seeing a typhoon coming and reinforcing your doors and windows in advance, rather than waiting until the roof has already been blown off to react.

Of course, there’s probably more detailed mechanism analysis in the original article, but even just this idea is already quite innovative.