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How Does a DEX Prevent Liquidation Cascading?

By using stable, TWAP-based oracle mark prices and employing staged liquidation or backstop liquidity systems to absorb large-order impact.
Greeks.Live23.11.25

How Does a DEX Prevent Liquidation Cascading?

A DEX prevents liquidation cascading by using stable, oracle-fed mark prices (often TWAP-based) instead of the volatile last traded price to trigger liquidations. Additionally, some DEXs employ a staged liquidation process or a backstop liquidity system to absorb the impact of large liquidations, preventing them from destabilizing the protocol's overall liquidity.

How Does the Choice between a TWAP and VWAP Oracle Impact the Execution of Large Orders?
What Is a Volume-Weighted Average Price (VWAP) and How Does It Differ from TWAP?
In Which Market Conditions Would a TWAP Oracle Be More Reliable than a VWAP Oracle?
What Is the Role of Liquidity in the Manipulation of a TWAP Oracle?

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