Liquidation Improvements based on Health-Factor #535

Debugger022 · 2025-07-07T06:42:10Z

Description

[VEN-3319]: Dynamic Liquidation Incentive and Close Factor in IL.
[VEN-3320]: Define maximum Liquidation Incentive per seized asset in IL.

This PR introduces a dynamic liquidation mechanism that adjusts the close factor and liquidation incentive based on the borrower's Health Factor (HF).

If HF > 1 → no liquidation
If HF ≤ 1 and > HFTTL:
- Use max liquidation incentive (LI)
- Compute close factor to restore HF to 1 (capped at 100%)
If HF ≤ HFTTL:
- Use 100% close factor
- Compute incentive dynamically:
- LiquidationIncentive = min(LI, (HF / AvgLT) - 1)

Note: The Comptroller contract has grown beyond 24KB due to the introduced logic.

Checklist

I have updated the documentation to account for the changes in the code.
If I added new functionality, I added tests covering it.
If I fixed a bug, I added a test preventing this bug from silently reappearing again.
My contribution follows Venus contribution guidelines.

chechu · 2025-07-21T10:00:15Z

contracts/ComptrollerStorage.sol

-    /**
-     * @notice Multiplier representing the discount on collateral that a liquidator receives
-     */
-    uint256 public liquidationIncentiveMantissa;


Maintain the attribute, to not break the storage layout. Simply rename it to "deprecatedLiquidationIncentiveMantissa"?

chechu · 2025-07-21T10:00:43Z

contracts/ComptrollerStorage.sol

        // Per-market mapping of "accounts in this asset"
        mapping(address => bool) accountMembership;
+        // discount on collateral that a liquidator receives when liquidating a borrow in this market
+        uint256 liquidationIncentiveMantissa;


Suggested change

uint256 liquidationIncentiveMantissa;

uint256 maxLiquidationIncentiveMantissa;

chechu · 2025-07-21T10:01:15Z

contracts/VToken.sol

I would avoid changes in the VToken contract, if it's doable. Because vBNB cannot be upgraded

chechu · 2025-07-21T10:05:38Z

contracts/lib/Liquidation.sol

+import { Comptroller } from "../Comptroller.sol";
+import { VToken } from "../VToken.sol";
+
+library Liquidation {


I think this could be a contract, to be deployed externally and then set in the Comptroller with a new privileged function. That would allow us to update the Liquidation logic on runtime. Just to review it

chechu · 2025-07-28T08:39:36Z

contracts/Comptroller.sol

    event DelegateUpdated(address indexed approver, address indexed delegate, bool approved);

+    /// @notice Emitted when the liquidation manager is set
+    event LiquidationModuleSet(address indexed ILiquidationManager);


Suggested change

event LiquidationModuleSet(address indexed ILiquidationManager);

event NewLiquidationManager(ILiquidationManager indexed oldLiquidationManager, ILiquidationManager indexed newLiquidationManager);

chechu · 2025-07-28T08:42:56Z

contracts/Comptroller.sol

+
+        uint256 closeFactor;
+        unchecked {
+            if (snapshot.healthFactor >= 1e18) revert InsufficientShortfall();


Use MANTISSA_ONE instead of 1e18?

chechu · 2025-07-28T09:44:07Z

contracts/Comptroller.sol

+
+        uint256 closeFactor;
+        unchecked {
+            if (snapshot.healthFactor >= 1e18) revert InsufficientShortfall();


I don't think we need this check, because if healthFactor is greater than 1, then the snapshot.shortfall should be 0, and the TX would have been reverted in the line 727

chechu · 2025-07-28T09:45:55Z

contracts/Comptroller.sol

+            if (snapshot.healthFactor >= snapshot.healthFactorThreshold) {
+                uint256 numerator = borrowBalance * 1e18 - wtAvg * snapshot.totalCollateral;
+                uint256 denominator = borrowBalance *
+                    (1e18 - ((wtAvg * (1e18 + marketCollateral.maxLiquidationIncentiveMantissa)) / 1e18));
+                closeFactor = (numerator * 1e18) / denominator;
+                closeFactor = closeFactor > 1e18 ? 1e18 : closeFactor;
+            } else {
+                closeFactor = 1e18;
+            }


Maybe we could also move the calculation of the variable close factor to the LiquidationManager

github-actions · 2025-07-29T10:51:14Z

Package	Line Rate	Branch Rate	Health
contracts	83%	69%	✔
contracts.Gateway	98%	68%	✔
contracts.Gateway.Interfaces	100%	100%	✔
contracts.Lens	95%	69%	✔
contracts.Lens.legacy	0%	0%	❌
contracts.Pool	100%	92%	✔
contracts.Rewards	96%	70%	✔
contracts.Shortfall	100%	85%	✔
contracts.legacy.RiskFund	0%	0%	❌
contracts.lib	100%	89%	✔
Summary	71% (1583 / 2216)	62% (506 / 822)	➖

Debugger022 added 3 commits July 7, 2025 12:00

feat: add new vars in AccountLiquiditySnapshot

d2f5cd0

feat: modify comptroller interface

1f2d92b

feat: add dynamic close factor and liquidation incentive

a2ac784

Debugger022 self-assigned this Jul 7, 2025

Debugger022 added 26 commits July 8, 2025 18:13

feat: add contract-sizer in hardhat config

39c970d

chore: update yarn.lock

5aac9d2

feat: move liquidation logic to Liquidation library

083a1f7

feat: update comptroller to use Liquidation library functions

8c964fa

feat: add maximum liquidation incentive per asset

7c65f24

feat: update liquidation library

32bf187

refactor: remove pool liquidation Incentive reference

2716fec

feat: moved reward updates logic to Rewards library

e1f58da

refactor: removed liquidation Incentive mapping

0921fce

refactor: reduced comptroller size

dec2414

fix: minor fix

f2ef6fd

fix: adjust heal account tests for dynamic factors

27cf44c

fix: adjust liquidate account tests for dynamic factors

47ba38e

refactor: add zero checks in snapshot calculations

876e44e

test: fix hooks and setters test

5860efe

test: fix seize tokens test

fc9c6a7

refactor: moved rewards logic to internal functions

691c424

test: fix pool lens test

bebf45d

test: fix tests

2811258

feat: getter for liquidation incentive per market

8876c29

fix: fixed vTokens test

e6e906f

test: fix NativeToken gateway test

749dbb6

fix: Average liquidation incentive calculation

e8ea512

refactor: corrected addPool signature

c4a5768

refactor: adjust computation in calculateIncentiveAdjustedDebt

fe24745

test: fixed integration tests

bfd294f

chechu reviewed Jul 21, 2025

View reviewed changes

contracts/VToken.sol

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chechu Jul 21, 2025

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I would avoid changes in the VToken contract, if it's doable. Because vBNB cannot be upgraded

chechu reviewed Jul 21, 2025

View reviewed changes

Debugger022 added 11 commits July 22, 2025 17:30

fix: fixed storage layout

525f1cf

feat: external Liquidaiton Manager contract instead of library

c825a8e

feat: Liquidation Manager interface

c907123

feat: update comptroller interface

b6f0e5e

feat: add liquidation manager setter and refactor dependencies

d072b0a

refactor: add MarketListed internal function to reduce comptroller size

d86ccaa

feat: add natspec comments for reward functions

ebcd3e4

fix: fix tests

8451373

refactor: move order processing back to comptroller

d8bc0ce

fix: integration test

dbf5739

test: fixed fork tests

3177bf8

chechu reviewed Jul 28, 2025

View reviewed changes

Debugger022 marked this pull request as ready for review July 28, 2025 08:50

chechu reviewed Jul 28, 2025

View reviewed changes

Debugger022 added 5 commits July 28, 2025 20:40

feat: liquidation Manager for common functionalities of core and IL

ec585af

feat: IL specific liquidation manager

1dc088c

refactor: using ILLiquidation manager in comptroller

91c22c3

refactor: moved some logic to Liquidation Manager

b7ad5ae

test: refactor tests

e7285d6

fred-venus force-pushed the develop branch 4 times, most recently from 5beda80 to 6ab87cb Compare December 12, 2025 05:48

	uint256 liquidationIncentiveMantissa;
	uint256 maxLiquidationIncentiveMantissa;

	event LiquidationModuleSet(address indexed ILiquidationManager);
	event NewLiquidationManager(ILiquidationManager indexed oldLiquidationManager, ILiquidationManager indexed newLiquidationManager);

Liquidation Improvements based on Health-Factor #535

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github-actions bot commented Jul 29, 2025

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Debugger022 commented Jul 7, 2025 •

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