Liquidations
In case of liquidations, Vaults are offered on a Dutch auction where bidders can buy the collateral assets for $taoUSD.
The initial price of the Vault is set to the value of the collateral. Then, the price gradually drops over the specified time period (voted via governance), enabling the bidders to realize an immediate arbitrage gain as the value of the Vault debt is usually expected to be lower than the value of the collateral assets.
If there are no bidders during the Dutch Auction, the auction is canceled and the liquidation is handled by the protocol.
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