How Liquidations Work in DeFi: A Deep Dive

Liquidation mechanisms are vital to the stability and solvency of decentralized finance (DeFi) protocols, especially in volatile market conditions. However, their complexity and sensitivity to various challenges—such as liquidity constraints, cascading liquidations, and cross-chain interactions—make them a critical area of focus for developers and auditors alike.

This article is divided into three parts:

1. The first part, Understanding the Role of Liquidations in DeFi, examines the challenges protocols face, including market volatility, oracle reliability, and bad debt management.

2. The second part, Examining Traditional and Modern Liquidation Architectures, explores traditional and modern liquidation architectures, highlighting both established approaches and innovative solutions like Curve's crvUSD and Fluid Vault.

3. The third part, Real-World Vulnerabilities and Lessons Learned, examines both audit findings and real incidents to provide actionable insights for more secure and efficient liquidation mechanisms.

Read the full article here:

Link: https://mixbytes.io/blog/how-liquidations-work-in-defi-a-deep-dive