MEV in Liquidations

MEV in liquidations refers to the profit-seeking behavior of network participants who use sophisticated strategies to front-run or sandwich liquidation transactions. Liquidators compete to be the first to trigger the liquidation of an undercollateralized position to capture the liquidation bonus offered by the protocol.

This competition often leads to gas wars, where participants bid up fees to ensure their transaction is included first in a block. While this ensures that liquidations happen quickly, it also extracts value from the ecosystem and can lead to increased costs for users.

Advanced liquidators use private transaction relays to avoid being front-run by other bots. This phenomenon highlights the complex interplay between protocol design and the underlying network microstructure.