The trustless nature of permissionless blockchains renders overcollateralization a key safety component relied upon by decentral- ized finance (DeFi) protocols. Nonetheless, factors such as price volatil- ity may undermine this mechanism. In order to protect protocols from suffering losses, undercollateralized positions can be liquidated. In this paper, we present the first in-depth empirical analysis of liquidations on protocols for loanable funds (PLFs). We examine Compound, one of the most widely used PLFs, for a period starting from its conception to September 2020. We analyze participants’ behavior and risk-appetite in particular, to elucidate recent developments in the dynamics of the pro- tocol. Furthermore, we assess how this has changed with a modification in Compound’s incentive structure and show that variations of only 3% in an asset’s dollar price can result in over 10m USD becoming liquid- able. To further understand the implications of this, we investigate the efficiency of liquidators. We find that liquidators’ efficiency has improved significantly over time, with currently over 70% of liquidable positions being immediately liquidated. Lastly, we provide a discussion on how a false sense of security fostered by a misconception of the stability of non-custodial stablecoins, increases the overall liquidation risk faced by Compound participants.