How Does a Dutch Auction Mechanism Work in the Context of Collateral Liquidation?

In a Dutch auction for collateral liquidation, the auction starts with the collateral priced high and then systematically lowers the price over time until a bidder accepts the current price. The first bidder to place a bid wins the auction and receives the collateral at that price.

This mechanism is designed to sell the collateral quickly and efficiently, which is crucial during times of high market volatility. It avoids the delays of traditional auctions and aims to get a fair market price without needing multiple bidders to compete simultaneously.