From 5a6ed4b3914fb65d2bd405a6bf741483d0aba08c Mon Sep 17 00:00:00 2001 From: "dr. mia von steinkirch, phd" <1130416+mvonsteinkirch@users.noreply.github.com> Date: Fri, 17 Feb 2023 13:39:03 -0800 Subject: [PATCH] Update README.md --- MEV_strategies/liquidations/README.md | 1 + 1 file changed, 1 insertion(+) diff --git a/MEV_strategies/liquidations/README.md b/MEV_strategies/liquidations/README.md index 13f6713..2b6fd6d 100644 --- a/MEV_strategies/liquidations/README.md +++ b/MEV_strategies/liquidations/README.md @@ -7,6 +7,7 @@
* **lending protocol** work by requiring users to deposit some collateral. users can then borrow different assets and tokens 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 protocol allows anyone to liquidate the collateral (similar to margin calls in traditional finance). +* **liquidation** happens when a user buys someone's collateral (at a discount) when the value of borrowed asset exceeds a predetermined value relative to the asset deposited as collateral. * **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. * **example of strategy**: bot detects a liquidation opportunity at a block and issues a liquidation tx, which is expected to be included in the next block. to compete with other liquidators, the bot sets high tx fees for their liquidation tx. * **another strategy**: bot observes a tx that will create a liquidation opportunity (e.g., an oracle price update tx rendering a collateralized debit to be liquidated), then backruns this tx with a liquidation tx to avoid the fee bidding competition.