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How Does Network Congestion Affect the Liquidation Process in Decentralized Lending?

High fees and slow confirmations prevent liquidators from executing timely liquidations, increasing protocol bad debt and market risk.
Greeks.Live19.11.25

How Does Network Congestion Affect the Liquidation Process in Decentralized Lending?

Decentralized lending protocols use liquidation mechanisms to secure loans when collateral falls below a threshold. During network congestion, the high transaction fees and slow confirmation times make it difficult for liquidators to execute their transactions promptly.

This can lead to liquidations failing or being significantly delayed, increasing the risk of bad debt for the protocol and causing cascading market instability.

What Mechanism Can Be Implemented to Incentivize the Timely ‘Reveal’ of a Committed Transaction?
How Does a Network’s Block Time Affect the Waiting Period for Six Confirmations?
What Is a ‘Liquidation Penalty’ and How Is It Structured in DeFi Lending Protocols?
What Is the Risk of a ‘Miner Extractable Value’ (MEV) Attack Related to Liquidations?

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