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Liquidation and Liquidity Theoretical

Enter Markets (Use fTokens as collateral)

We require users to specify whether they want to use a lent asset as liquidity for borrowing.

How does liquidity work?

Every open borrow is subject to be liquidated by a third party (that is, anyone) if the underlying value of the collateral locked in relation to the current value of the borrowed assets, falls under a certain level.
The following values are in the user's balances
collatUnderlyingMantissan=#fTokenSuppliedn∗exchangeRateMantissan∗collateralFactorMantissamantissacollatUnderlyingMantissa_{n} = \\\frac{\#fTokenSupplied_{n}*exchangeRateMantissa_{n}*collateralFactorMantissa}{mantissa}

NOTE: fTokenSupplied_n references fTokens supplied in entered markets.

debtUnderlyingMantissan=#borrowedTokensInUnderlyingn∗mantissandebtUnderlyingMantissa_{n}= \#borrowedTokensInUnderlying_{n}*mantissa_{n}
Note the n subscript implies the specific token

totalCollatDollarMantissa

totalCollatDollarMantissa=∑i=1ncollatUnderlyingMantissan∗dollarPerUnderlyingnunderlyingDecimalntotalCollatDollarMantissa =\\\sum_{i=1}^n\frac{collatUnderlyingMantissa_{n}*dollarPerUnderlying_{n}}{underlyingDecimal_{n}}

totalDebtDollarMantissa

totalDebtDollarMantisssa=∑i=1ndebtUnderlyingMantissan∗dollarPerUnderlyingnunderlyingDecimalntotalDebtDollarMantisssa = \\\sum_{i=1}^{n}\frac{debtUnderlyingMantissa_{n}*dollarPerUnderlying_{n}}{underlyingDecimal_{n}}

Zero Liquidity Point

totalDebtDollarMantissa=totalCollatDollarMantissa\\totalDebtDollarMantissa =totalCollatDollarMantissa

Liquidation

Liquidation is a process in which one user repays the debt of the a borrower and essentially purchases some of the borrowers collateral at a discounted rate relative to the amount of repayment. On the Finterest protocol, we consider a user as underwater when they hit the liquidation point specified below:

Liquidation Point

liquidationPoint=(totalDebtDollarMantissa>liquidationThresholdMantissa∗totalCollatDollarMantissamantissa)liquidationPoint =\\(totalDebtDollarMantissa >\\\frac{liquidationThresholdMantissa*totalCollatDollarMantissa}{mantissa})
When you hit liquidation point, a user may repay your debt until:
totalDebtDollarMantissa<=liquidationThresholdMantissa∗totalCollatDollarMantissamantissatotalDebtDollarMantissa <=\\\frac{liquidationThresholdMantissa*totalCollatDollarMantissa}{mantissa}
Liquidation/Repayment of a borrower's debt happens on an individual token and not for all assets at once.

Discounted Collateral Purchase/Seizure

Let n = the token that is being borrowed and m = the token that the liquidator wants to seize from the borrower
amountRepayDollarMantissa=repayedAmountn∗dollarPerUnderlyingn∗mantissaunderlyingTokenDecimalnamountRepayDollarMantissa=\\\frac{repayedAmount_{n}*dollarPerUnderlying_{n}*mantissa}{underlyingTokenDecimal_{n}}
collatSiezedDollarsMantissam=repaymentAmountn∗dollarPerUnderlyingn∗liquidationDiscountMantissanunderlyingTokenDecimalncollatSiezedDollarsMantissa_{m}= \\\frac{repaymentAmount_{n}*dollarPerUnderlying_{n}*liquidationDiscountMantissa_{n}}{underlyingTokenDecimal_{n}}
collatSiezedfTokensm=repaymentAmountDollarsMantissam∗decimalmdollarPerUnderlyingm∗exchangeRateMantissamcollatSiezedfTokens_{m} = \\\frac{repaymentAmountDollarsMantissa_{m}*decimal_{m}}{dollarPerUnderlying_{m}*exchangeRateMantissa_{m}}
A portion of seized collateral gets sent to the #Reserves and another portion to the liquidator
amountfTokensToReservesm=collatSeizedfTokensm∗protocolSeizeSharemmantissaamountfTokensToReserves_{m}= \\\frac{collatSeizedfTokens_{m}*protocolSeizeShare_{m}}{mantissa}
amountfTokensToLiquidatorm=collatSeizedfTokensm−amountfTokensToReservesmamountfTokensToLiquidator_{m}=\\collatSeizedfTokens _{m}-amountfTokensToReserves_{m}

​

Liquidation Checks

  1. 1.
    NOTE:
repayedAmountn=min[(closeFactorMantissan∗borrowBalanceBorrowern/mantissa),specifiedAmountn]repayedAmount_{n} =\\ min[(closeFactorMantissa_{n}*borrowBalanceBorrower_{n}/mantissa)\\,specifiedAmount_{n}]
Only the amount repaid will be taken from your balance so rest assured you are not being charged anymore than whats repaid.
  1. 2.
    Borrower hit liquidation point
  2. 3.
    ​
amoutRepayDollarMantissa<=(totalDebtDollarMantissa−liquidationThresholdMantissa∗totalCollatDollarMantissamantissa)amoutRepayDollarMantissa <=\\(totalDebtDollarMantissa\\-\frac{liquidationThresholdMantissa*totalCollatDollarMantissa}{mantissa})
  1. 4.
    ​
collatSiezedfTokensn<=fTokenCollatBalanceBorrowerncollatSiezedfTokens_{n} <=fTokenCollatBalanceBorrower_{n}
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Last modified 7mo ago