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How Does a Decentralized Exchange (DEX) Facilitate the Liquidation Process?

Liquidators buy seized collateral at a discount and sell it on the DEX to cover the debt and reduce stablecoin supply.
Greeks.Live23.11.25

How Does a Decentralized Exchange (DEX) Facilitate the Liquidation Process?

Liquidators, often automated bots, purchase the seized collateral from the stablecoin protocol at a discount and immediately sell it on a DEX for the stablecoin. This quick sale on the DEX generates the funds needed to repay the outstanding debt and cover the liquidation penalty, ensuring the stablecoin supply is reduced against the debt.

How Does a Validator’s Stake Act as a Security Bond in a PoS System?
Who Typically Executes the Liquidation Process in a Decentralized System?
What Is the Purpose of a Decentralized Exchange (DEX) in the Liquidation Process?
What Is the Relationship between the Discount Rate and the Volatility of the Underlying Asset?

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