How does the cell know which proteins to degrade, and when?

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Selective Intracellular Proteolysis.

Soluble Systems

Proteases in Programmed Cell-Death(The ICE Family)

Calcium-activated Proteases in Signal Transduction (Calpains)

Cell-cycle Contol and the Stress Response (Ubiquitin and Proteasomes)

Particulate Systems

Nutrient Regulated Proteolysis ("Non-specific Lysosomal Proteolysis")

Proof-reading During Protein Synthesis (Proteolysis in the ER)