From 85d1f88fefb02482625d56f352fe44265e012b13 Mon Sep 17 00:00:00 2001
From: bt3gl <1130416+bt3gl@users.noreply.github.com>
Date: Mon, 28 Mar 2022 01:58:14 -0700
Subject: [PATCH] Add notes on liquidations opportunities for MEV

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 notes/MEV/liquidations-notes.md | 7 +++++++
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 create mode 100644 notes/MEV/liquidations-notes.md

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+## Liquidations
+
+* 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.