Liquidations on Compound v2

Liquidations on Compound

Compound has an open liquidation system. Anyone can purchase assets from undercollateralized positions in exchange for paying off that position's debt. Liquidated assets have a close factor which limits how much debt can be repaid at one time so Compound allows for partial liquidations.

If a position is severely undercollateraized it may be liquidated multiple times. The liquidation penalty is passed to the purchaser through a discount on the debtors asset. This method allows for debt to be cleared from the Compound protocol. To learn more about the liquidation penalities see

What happens when your liquidated on Compound

If your position is undercollateralized a user or bot may liquidate your position buying your collateral assets at a discount and paying off your debt. Liquidators decide which asset they purchase from the undercollaterlized position if your position has multiple assets as collateral.

Are liquidations different between v2 and v3 Compound?

Yes! Check out this page to learn how positions are liquidated on Comp v2