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🍦 add some basic shit on liquidations

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Dr. Mia von Steinkirch 2022-10-15 17:42:47 -07:00 committed by GitHub
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liquidations/README.md
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* 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.
<br>
### strategy 1
* A detects a liquidation opportuniy at block B (after the execution of B). Then, A issues a liquidation transaction T, which is expected to be mined in the next block, B+1.
* A attempts to destructively front-run other competing liquidators by setting high transactions fees for their liquidation transaction T.
<br>
### strategy 2
* A observes a transaction T, which will create a liquidation opportunity (e.g., an oracle price update transaction which will render a collaterized debit liquidatable). A then back-runs T with a liquidation transaction Ti to avoid the transation fee bidding competition.