What Is the Purpose of a Decentralized Exchange (DEX) in the Liquidation Process?

A DEX is often used as the venue for selling the liquidated collateral in a CDP system. When a CDP is liquidated, the protocol needs to quickly convert the collateral (e.g.

ETH) into the stablecoin to cover the debt. Using a DEX ensures a transparent, on-chain, and permissionless process for the sale, minimizing the need for centralized auctions or intermediaries.