Liquidation happens when the health rate of a position is lower than 1. Collateral will be open to liquidation at a discount to prevent under-collateralization and protocol insolvency. This is done in a Dutch auction format, and the bill can be filled partially. The USP liquidator used to repay the debt positions will be burnt immediately.
Platypus adopted this auction model, allowing liquidators to purchase the liquidated collaterals at the highest acceptable price. This generates the least profit for liquidators, who tend to be bots and would still perform the liquidation action. This also retains the most value for debt positions.
The liquidator would only need to purchase part of the amount of collateral. Liquidations will continue if the position health rate remains under 1 after the purchase. If you are interested in learning more from a smart contract implementation perspective, check our yellow paper in section 2.6.
Flash loans for USP without collaterals can be undertaken as long as the transaction is executed in one block only. Withdrawal fees in the stableswap for LP tokens are removed in flash loans to prevent coverage ratio and price manipulation. The cost of the flash loan is subject to governance and is set to 0.09% initially. The maximum USP loanable is 50 million USP.