Unfortunately, ETH’s price declines by 30%, leaving the value of Bob’s collateral at 70 USD ($100 * (1-0.3)), which means the Utilisation Ratio now exceeds 1 i.e. $60/($70*0.8) = $60/$56 = 1.07. For the USDC-ETH pair the liquidation discount, or liquidation fee, is set at 5% by the protocol. Now Lenny, as liquidator, will seek Bob’s ETH collateral at a fixed discount of 5% to market price so he will pay 66.5 USDC to get the 70 USD worth of ETH collateral, which at the time the event occurs results in a 3.5 USD surplus. Liquidators will either choose to hold the underlying asset or to liquidate them on-market so as to lock in this surplus.