Liquidation

Why liquidate？

When the value of the collateral within a Vault is insufficient to support the debt, the system needs to take over the collateral and debt and auction it off to achieve a situation where the system's assets exceed its liabilities.

The most important principle of the system is that at any moment, the value of assets cannot be less than the value of liabilities. To achieve this purpose, we need a liquidation system and an auction system.

Liquidation In the Ethereum network, a block is typically around 10 seconds, and during network congestion, the confirmation time for a transaction might be longer, making liquidation not very real-time. However, in the Arbitrum network, a transaction can be confirmed within a second, allowing for rapid price feeding. And the gas cost is much lower than on the Ethereum mainnet.

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