The trigger
An oracle reports a price that pushes your health factor to or below one. From that moment the position is eligible, and bots monitoring every position on the protocol compete to act on it within seconds.
There is no grace period and no human review. The speed is a feature — slow liquidation is how a protocol ends up with bad debt.
The transaction
A liquidator repays a portion of your debt and receives an equivalent value of your collateral plus a bonus, typically a few percent. Your debt falls, your collateral falls by more, and your health factor improves.
Many protocols cap how much can be liquidated at once, so a position may be partially liquidated several times as the price continues to move.
What it costs you
The bonus, which is pure loss. Any protocol liquidation fee on top. And the fact that you sold collateral at the worst available moment, which is exactly when prices are falling.
A liquidation during a sharp move frequently costs more than the loss that caused it.
Cascades and why they matter
Liquidations sell collateral into a falling market, pushing the price lower, which triggers more liquidations. During a cascade, oracle updates lag, gas spikes, and the ability to add collateral in time disappears.
The defence is structural rather than reactive: maintain a margin wide enough that an ordinary bad day does not reach your threshold, because during a cascade you will not be able to act.