For Searchers ​

Liquidations Calls ​

The health of Bend is dependent on the 'health' of the positions within the protocol, also known as the 'health factor'. When the 'health factor' of an account's total loans is below 1, anyone can make a liquidationCall() to the Pool contract, pay back part of the debt owed and receive discounted collateral in return (also known as the liquidation bonus).

This incentivises third parties to participate in the health of the overall protocol, by acting in their own interest (to receive the discounted collateral) and as a result, ensure borrows are sufficiently collateralize.

There are multiple ways to participate in liquidations:

1. By calling the liquidationCall() directly in the Poolcontract.
2. By creating your own automated bot or system to liquidate loans.

Prerequisites ​

When making a liquidationCall(), you must:

• Know the account (i.e. the ethereum address: user) whose health factor is below 1.

• Know the valid debt amount and asset (i.e. debtToCover & debtAsset)

  • If the HF is above CLOSE_FACTOR_HF_THRESHOLD, then only a maximum of 50% (i.e. DEFAULT_LIQUIDATION_CLOSE_FACTOR) of the debt can be liquidated per valid liquidationCall()

  • If the HF is below CLOSE_FACTOR_HF_THRESHOLD, then 100% (i.e. MAX_LIQUIDATION_CLOSE_FACTOR) of the debt can be liquidated in single valid liquidationCall()

  • You can set the debtToCover to uint(-1) and the protocol will proceed with the highest possible liquidation allowed by the close factor.

  • You must already have sufficient balance of the debt asset, which will be used by the liquidationCall to pay back the debt.

• Know the collateral asset collateralAsset you closing, i.e. the asset that the user has backing their outstanding loan that you will receive as a bonus.

• Whether you want to receive aTokens or the underlying asset after a successful liquidationCall() .

Getting accounts to liquidate ​

Only user accounts that have HF < 1 can be liquidated. There are multiple ways you can get the health factor:

On Chain ​

• To gather user account data from on-chain data, one way would be to monitor emitted events from the protocol and keep an up to date index of user data locally.

  • Events are emitted each time a user interacts with the protocol (supply, borrow, repay, withdraw etc.)

• When you have the user's address, you can simply call getUserAccountData(), to read the user's current healthFactor. If the HF < 1, then the account can be liquidated.

Executing the liquidation call ​

Once you have the account(s) to liquidate, you will need to calculate the amount of collateral that can be liquidated:

• Use getUserReserveData().

• Max debt that be cleared by single liquidation call is given by the DEFAULT_LIQUIDATION_CLOSE_FACTOR(when CLOSE_FACTOR_HF_THRESHOLD < HF < 1) or MAX_LIQUIDATION_CLOSE_FACTOR (when HF < CLOSE_FACTOR_HF_THRESHOLD)

  • debtToCover = (userStableDebt + userVariableDebt) * LiquidationCloseFactor

  • You can pass uint(-1), i.e. MAX_UINT, as the debtToCover to liquidate the maximum amount allowed.

• Max amount of collateral that can be liquidated to cover debt is given by the current liquidationBonus for the reserves that have usageAsCollateralEnabled as true.

  • maxAmountOfCollateralToLiquidate = (debtAssetPrice * debtToCover * liquidationBonus)/ collateralPrice

Calculating profitability vs gas cost ​

One way to calculate the profitability is the following:

1. Store and retrieve each collateral's relevant details such as address, decimals used and liquidation bonus.

2. Get the user's collateral balance (aTokenBalance).

3. Get the asset's price according to the Bend Protocol's oracle contract using getAssetPrice().

4. The maximum collateral bonus received on liquidation is given by the maxAmountOfCollateralToLiquidate * (1 - liquidationBonus) * collateralAssetPriceEth

5. The maximum cost of your transaction will be you gas price multiplied by the amount of gas used. You should be able to get a good estimation of the gas amount used by calling estimateGas via your web3 provider.

6. Your approximate profit will be the value of the collateral bonus (4) minus the cost of your transaction (5).

Appendix ​

How is health factor calculated? ​

The health factor is calculated from the user's total collateral, i.e. all reserves for which usageAsCollateral is enabled, balance (in ETH) multiplied by the liquidation threshold percentage for all the user's outstanding assets, divided by the user's total borrow balance across all reserves (in ETH).