Crypto glossary
Liquidation bot (keeper)
A liquidation bot, or keeper, is an automated program that repays risky DeFi loans in exchange for discounted collateral, keeping lending protocols solvent.
DeFi lending protocols do not liquidate loans themselves; they rely on outside actors. Liquidation bots monitor every borrowing position and oracle update, and as soon as a loan crosses its liquidation threshold they send a transaction that repays part of the debt and claims the collateral plus a bonus. Many use flash loans so they need no capital of their own, and they compete with each other on speed and gas fees.
Keepers are an essential part of the plumbing behind Aave, Compound, Maker-style vaults and perpetual exchanges. During sharp market drops they process billions of dollars of liquidations in hours, and the competition between them is a major source of MEV on Ethereum and other chains.
The system depends on bots being able to act. When networks congest, gas spikes or collateral cannot be sold without huge slippage, liquidations can fail or arrive late, leaving the protocol with bad debt. Running a profitable keeper today requires sophisticated infrastructure, and most profits go to a small group of professional searchers.
Example
When ETH drops 15% in an hour, a liquidation bot repays 50,000 USDC of a user's Aave debt in a single transaction and receives ETH worth about 52,500 dollars, pocketing the bonus minus gas.