From 2686fbff1a17ff7e11d14889642d07b9a5b5dca3 Mon Sep 17 00:00:00 2001 From: bt3gl <1130416+bt3gl@users.noreply.github.com> Date: Sat, 24 Sep 2022 22:26:55 -0700 Subject: [PATCH] =?UTF-8?q?=F0=9F=A7=80=20liquidations?= MIME-Version: 1.0 Content-Type: text/plain; charset=UTF-8 Content-Transfer-Encoding: 8bit --- MEV_on_Ethereum/liquidations.md => liquidations/README.md | 6 ++++++ 1 file changed, 6 insertions(+) rename MEV_on_Ethereum/liquidations.md => liquidations/README.md (98%) diff --git a/MEV_on_Ethereum/liquidations.md b/liquidations/README.md similarity index 98% rename from MEV_on_Ethereum/liquidations.md rename to liquidations/README.md index 9187f41..911e282 100644 --- a/MEV_on_Ethereum/liquidations.md +++ b/liquidations/README.md @@ -2,8 +2,14 @@
+### tl, dr + * Lending protocol (e.g. Aave or Maker) liquidations present a well-known MEV opportunity. + * They work by requiring users to deposit some collateral. Users can then borrow different assets and toekns from others depending on what they need, up to a certain amount of their deposited collateral. + * As the value of a borrower's collateral fluctuates, if the value of the borrowed assets exceeds the value of the collateral, the protcol allows anyone to liquidate the collateral (similar to margin calls in traditional finance). + * If liquidated, the borrower usually has to pay a hefty liquidation fee, some of which goes to the liquidator (where the MEV opportunity comes in). + * Searchers compete to parse blockchain data as fast as possible to determine which borrowers can be liquidated and be the first to submit a liquidation transaction and collect the liquidation fee.