In defi market liquidator requests loan collaterals to be liquidated (when ltv crosses a certain threshold). For most defi application is it done automatically ( maybe through a smart contract) or an actual external user is involved in initiating the liquidation?
1 Answer
All the liquidation mechanisms that I have seen require someone to send a transaction to initiate the liquidation.
I don't think it can be done "automatically", meaning without anyone sending a transaction. A liquidation involves transferring tokens from an address to another, which changes the state, and so require a transaction. A transaction has to be initiated by someone, although for liquidations that someone is almost always a bot.
Just to clarify - A transaction has to be sent, but it is almost never sent manually by someone. It's sent by a bot that monitors the market for undercollateralized loans.
