mirror of
https://github.com/autistic-symposium/mev-toolkit.git
synced 2025-05-02 06:46:13 -04:00
7 lines
890 B
Markdown
7 lines
890 B
Markdown
## 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.
|