Blockspace Scarcity

Blockspace scarcity is the fundamental limitation on the number of transactions that can be processed by a blockchain at any given time. This limitation is a result of the consensus mechanism and the block size constraints designed to maintain decentralization.

When demand for transactions exceeds this capacity, the cost of including a transaction increases, leading to higher gas fees. This has a direct impact on liquidations, as they must compete for this limited space.

If blockspace is too scarce, critical liquidations may be delayed, posing a risk to the protocol. Understanding this scarcity is vital for optimizing protocol performance and ensuring that liquidations remain feasible even during high-demand periods.