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This overview addresses the atomistic aspects of degradation of layered LiMO₂ (M = Ni, Co, Mn) oxide Li-ion battery cathode materials, aiming to shed light on the fundamental degradation mechanisms especially inside active cathode materials and at their interfaces. It includes recent results obtained by novel in situ/in operando diffraction methods, modelling, and quasi in situ surface science analysis. Degradation of the active cathode material occurs upon overcharge, resulting from a positive potential shift of the anode. Oxygen loss and eventual phase transformation resulting in dead regions are ascribed to changes in electronic structure and defect formation. The anode potential shift results from loss of free lithium due to side reactions occurring at electrode/electrolyte interfaces. Such side reactions are caused by electron transfer, and depend on the electron energy level alignment at the interface. Side reactions at electrode/electrolyte interfaces and capacity fade may be overcome by the use of suitable solid-state electrolytes and Li-containing anodes.