The bots that clear DeFi's bad loans

01 · The jobHow a liquidation works

On August 5, 2024, crypto prices fell hard, and bots cleared $341 million of bad loans on Ethereum's lenders in a single day. Forty-three of them joined in. Three took more than half the work.

Lenders like Aave let you borrow against crypto you post as collateral. If the collateral loses too much value, the loan can be closed by force. A liquidator repays part of it and takes some of the collateral at a discount the lender sets, called the liquidation bonus. That bonus is the pay for the job, and anyone can claim it.

In practice the liquidator is a bot. Bots watch every loan, every price and the mempool, and fire the moment a loan crosses the line. The first to land gets the bonus. Our look at Ethereum lending since 2021 counts how much debt went this way. The question here is who does the work.

We count the lenders that pay a bot to do it: Aave in all its versions, Spark, Compound v2, Morpho, Euler, Fluid, Abracadabra and Kashi. Between them they saw about four fifths of all the debt liquidated.

02 · The fieldMany bots, a few winners

Almost 1,900 addresses have done this job at least once on these lenders. Most did it rarely. In every year, the ten busiest handled more than half of the debt, and in three of the six years close to three quarters.

One bot now stands out. Since February 2025, a single contract has cleared $579 million of loans on Aave, Morpho and Spark. That is almost 30% of all the debt paid off on these lenders in that time.

03 · Who they areUnnamed contracts

Every one of the busiest bots is a contract with no public name. Our labels name almost none of them. Most were busy for a year or less before newer bots took over, which says something about the game. Speed wins, and the fastest bots do not stay fastest for long.

04 · Crash daysWhen prices fall at once

Crashes are when the race matters most. On the five busiest days in our data, a few dozen bots took part each time, yet the top three still took roughly half the debt or more. On the worst day of the first boom, in May 2021, one bot handled more than a third of it alone.

05 · Cheaper gasSmaller and smaller loans

A bot only makes money if the bonus is worth more than the gas it pays. In the first boom, gas for one of these jobs usually cost more than $100, and the median loan paid off was worth almost $5,000.

Then gas on Ethereum got much cheaper. By this year the median job cost less than 50 cents, and bots began closing loans worth a few dollars. Over the last two years about half of all these jobs were loans under $100.

Two thirds of those small ones sat on old markets: Aave v1 and v2, and Compound v2. On Aave's current market the median loan paid off was still above $2,000.

06 · The sweepCleaning out the old markets

The biggest sweep came from Aave itself. In late September 2025 a contract called ClinicStewardV2 started working through dust loans left on Aave v2. Its verified code points at the old pool and at Aave's treasury, and gives it a budget for clean-up. In three weeks it closed more than five thousand loans, at times dozens in one go. The median loan was about a dollar, and the whole sweep came to about $20,000.

Bots do the same when it pays. In June 2026 one bot closed most of that month's small loans on Aave's old market. Our labels tag it as an MEV bot, one built to profit from the order of trades, much like the ones in our study of crypto arbitrage.

07 · The answerA few bots, working for pennies

So who clears DeFi's bad loans? On Ethereum, mostly a handful of unnamed contracts. They race each other on every crash and win on speed, and few stay on top for long. As gas got cheap, they went down to loans worth a few dollars, and Aave paid for its own sweep of the smallest ones.

That race keeps lenders safe. When no liquidator steps in, bad debt piles up instead, as it did in Morpho's zombie markets.

08 · How we measuredWhat we counted, and what we left out

We rebuilt each liquidation on these lenders from their own on-chain events, from the start of 2021 to late September 2026, and valued each loan at that day's price. The bot is the address the lender records, usually a contract rather than its owner. We did not estimate what bots earned. Daily prices miss the discount on a day when prices swing, and bots also pay for swaps and for getting in first.

Three lenders work another way. On Maker, the collateral goes to an auction and what is left goes back to the borrower. On Compound v3, the protocol takes the collateral itself. On Liquity, a shared pool of depositors takes it. Whoever starts these clean-ups keeps little or none of the collateral. Together they saw about a fifth of the debt since 2021, and they are left out of the counts above.

09 · The recordThe contracts behind the numbers