What Is a Liquidation Bonus? Why DeFi Protocols Reward…
By Tobi Opeyemi Amure
Source excerpt · FinanceFeeds
Decentralized finance (DeFi) lending protocols need a way to recover loans when borrowers can no longer maintain sufficient collateral. To manage this risk, many protocols allow traders to liquidate eligible positions and offer them a financial incentive for doing so. This reward, known as a liquidation bonus, encourages participants to repay outstanding debt in exchange for a portion of the borro…