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What Is the Role of a Liquidation Bot in a Decentralized Margin Trading Platform?

Liquidation bots monitor positions and call the smart contract function to close under-collateralized debt for a fee.
Greeks.Live06.11.25

What Is the Role of a Liquidation Bot in a Decentralized Margin Trading Platform?

A liquidation bot is an external, automated agent that monitors the collateral ratio of leveraged positions on a DEX. When a position's margin falls below the maintenance threshold, the bot is incentivized to call the smart contract's liquidation function.

The bot executes the liquidation, typically receiving a small fee as a reward. This decentralized process ensures that risky debt is promptly closed to protect the protocol's solvency.

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