Liquidation Engine Congestion

Liquidation engine congestion occurs when the number of positions requiring liquidation exceeds the capacity of the protocol to process them, leading to a backlog of pending transactions. This often happens during periods of high market volatility when many positions become undercollateralized simultaneously.

As the engine struggles to process these liquidations, the protocol remains exposed to the risk of further price drops, which can worsen the insolvency of the system. Congestion is often exacerbated by network-wide transaction fees and latency, which can delay the execution of liquidations even further.

A robust liquidation engine must be able to scale dynamically to handle these high-stress events without failing or stalling.