When a user can’t repay his loans, the protocol typically allows anyone to liquidate the collateral and earn a liquidation fee from the borrower
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What is maximal extractable value (MEV)?
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Liquidation competition during market downturns intensifies systemic risk, as MEV searchers rush to seize undercollateralized assets, accelerating volatility.
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Liquidation-based MEV involves bots identifying undercollateralized loans on decentralized finance platforms and rapidly executing transactions to seize collateral and earn liquidation bonuses.
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