A discount is given to the buyer of the collateral (also known as the liquidator) as an incentive, increasing the likelihood of demand for liquidations, thus decreasing the overall protocol risk. To better understand this, consider the following scenario: there is currently a market crash, and many users' positions are flagged for liquidation as cryptocurrencies and tokens plummet in USD price. For a liquidator, buying a user's collateral at face value exposes them to market risk. In other words, the price of the purchased collateral may have decreased between the time the liquidator purchased the collateral asset and the time they sold the collateral asset. Therefore, the protocol has to give liquidators a discount to compensate them for this risk. Because liquidators' capital is scarce, money markets have to compete over their capital so that the protocols remain solvent. These are all reasons why the liquidation discount should be relatively high.