In a perfect world, if the depeg sustained and grew, liquidations would occur in an orderly process and protect lenders from duration risk and internalizing the depeg. But DeFi is far from a perfect world. The actors we need to help liquidations like this process smoothly do not currently exist. There is no seamless way currently to transfer this risk from lenders to stETH arbitrageurs. How it would probably play out today on an example $100 million stETH position: 1. Looper becomes unhealthy due to interest accrual. 2. Liquidation becomes available to public offering a 1% spread to swap $500 million of stETH into ETH. 3. Let’s say there exists a market maker who is willing to take on $100 million of stETH and hold this until it can be redeemed 1:1 with ETH, giving a ~1.3% profit over ~18 days. Chances are this market maker is not properly set up to win the liquidation via current block space auctions, instead it will be won by simplistic searchers who specialize in block space auctions, but do not specialize in arbitraging stETH. 4. Simplistic searcher wins the liquidation and dumps $500 million of stETH onto AMMs, pushing the price down further and increasing risk for everyone. 5. The market maker would then likely come in and arbitrage the AMM for $100 million of stETH. The sub-par outcome: ~$400 million of stETH that did not have to be dumped on the market has been sold, when only ~$100 million or less was required to maintain solvency of the protocol. This flow hit AMMs rather than private liquidity. Likely the 1% spread was more than needed, leaving the borrower in a position where they are more likely to be liquidated for a second time, increasing risk again. The market maker was paid more than they needed to be because they likely could have taken on stETH at a .5% discount, now they receive a >1% discount arbitraging back the $500 million stETH sale. Many people think offering free money ensures sophisticated actors will step in, this is not the reality. Situations like this show the benefit of Fluid liquidations that offer liquidation opportunities via a swap interface, this simple QoL improvement for liquidators may end up providing a significant benefit if it helps the market maker step in before a simplistic searchers can.