## liquidation

<br>

### tl, dr

<br>

* **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.

<br>

---

### in this dir

<br>

* [compound](compound.md)
* [liquity](liquity.md)
* [aave](aave.md)
* [euler](euler.md)

<br>

---

## resources

<br>

* [anatomy of liquidator bots](https://github.com/go-outside-labs/mev-toolkit/blob/main/MEV_searchers/bots/liquidators.md)
* [notes on lending as a trader](https://github.com/go-outside-labs/mev-toolkit/tree/main/MEV_and_trading/lending)
* [liquidation dashboard, by eigenphi](https://eigenphi.io/mev/ethereum/liquidation)
* [understanding compound's liquidation, by zengo](https://zengo.com/understanding-compounds-liquidation/)
* [nahtan worsley's liquidation strategies, by forbes](https://www.forbes.com/sites/jeffkauflin/2022/10/11/the-secretive-world-of-mev-where-crypto-bots-scalp-investors-for-big-profits/?sh=25489eda2d8d) 
* [cycle of liquidations in the CRV pool](https://twitter.com/AaveAave/status/1595168982541209611)
* [how to build a liquidator bot for defi, by powpark](https://powpark.com/post/2020-06-19-how-to-build-a-liquidator-bot-defi/)
* [liquidators, the secret whales helping defi, by tom schimidt](https://medium.com/dragonfly-research/liquidators-the-secret-whales-helping-defi-function-acf132fbea5e)
* [mitigating defi liquidations with reversible call options, by qin et al](https://eprint.iacr.org/2023/254)