SOLUTION 40: THE "LIQUIDATION MARKETPLACE" SOLUTION WITH $DOLO
THE INEFFICIENCY OF CURRENT LIQUIDATION MODELS
In many DeFi protocols, the liquidation process is a simple, first come, first served race. This can lead to inefficient outcomes and unnecessary losses for the borrower. The Dolomite protocol's architecture, which is governed by the $DOLO asset, can support a more efficient and transparent **liquidation marketplace**.
A COMPETITIVE AND ORDERLY PROCESS
Instead of a simple race, Dolomite's solution could be a batch auction system for liquidations. When a position becomes eligible for liquidation, it is entered into a short auction. A decentralized network of liquidator bots can then bid on the collateral. The winning bid the one that offers to repay the debt for the smallest amount of collateral wins the auction. This competitive bidding process ensures that the borrower's position is liquidated at the best possible price, minimizing their losses. The creation of this efficient marketplace, a core priority for the @Dolomite community, makes the platform safer for all users. The dolo digital asset is central to this security model.