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Do they sell them on Uniswap or Binance? Does it happen automatically? If they just sell on some random Dex, how do they avoid major slippage? Where does a protocol say how it liquidates positions?

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The liquidated assets are auctioned off to third parties at less than their face value for a quick sale (as opposed to trying to avoid major slippage selling at some random Dex), then the third party may sell them in the market to earn the difference.

See: https://www.ledger.com/academy/defi-liquidation-explained

The liquidation process generally happens automatically when the investor fails to maintain the requirements set for their leveraged position. Here is for example where Aave and Synthetix state how they liquidate positions:

https://docs.aave.com/developers/guides/liquidations

https://sips.synthetix.io/sips/sip-304/

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  • Great answer Yongjian! Thanks for the links! Nov 27, 2022 at 6:22
  • You welcome Oliver! Nov 27, 2022 at 8:02

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