RWA-Backed Liquidations on Ethereum May Shift Off-Chain

Ethereum lending platforms recorded about $1.63 billion in liquidations in the year through Oct. 18.

An atomic liquidation converts collateral and repays debt in a single onchain transaction. It can use a flash loan, a liquidator's own capital or a direct smart-contract call.

Real-world asset (RWA)-backed loans can be harder to liquidate immediately on decentralized exchanges (DEXs). Their tokens may face thin liquidity pools or transfer rules that limit transactions to approved addresses.

More RWA-backed liquidations may move to off-chain market makers, request-for-quote (RFQ) trades and solvers that take the collateral before closing a position. That could increase off-chain counterparties' role in RWA-backed liquidations.