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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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

To Worsley and his trading bot, the most attractive part of the whole gambit was a 12.5% reward paid to anyone willing to help liquidate borrowers whose collateral no longer met stipulated minimum requirements.

MEV searchers will compete to determine which borrowers can be liquidated and collect the liquidation fee for themselves

Related topics

Maximal Extractable Value (MEV)