Liquidate

The liquidate function is to allow an external entity (referred to as the liquidator) to liquidate a borrower's position in a lending market. This happens when the borrower's position becomes risky or unhealthy, typically due to a decline in the value of the collateral relative to the borrowed assets

function liquidate(
        MarketParams memory marketParams,
        address borrower,
        uint256 seizedAssets,
        uint256 repaidShares,
        bytes calldata data
    ) external returns (uint256, uint256) {
        Id id = marketParams.id();
        require(market[id].lastUpdate != 0, ErrorsLib.MARKET_NOT_CREATED);
        require(UtilsLib.exactlyOneZero(seizedAssets, repaidShares), ErrorsLib.INCONSISTENT_INPUT);

        _accrueInterest(marketParams, id);

        uint256 collateralPrice = IOracle(marketParams.oracle).price();

        require(!_isHealthy(marketParams, id, borrower, collateralPrice), ErrorsLib.HEALTHY_POSITION);

        uint256 repaidAssets;
        {
            // The liquidation incentive factor is min(maxLiquidationIncentiveFactor, 1/(1 - cursor*(1 - lltv))).
            uint256 liquidationIncentiveFactor = UtilsLib.min(
                MAX_LIQUIDATION_INCENTIVE_FACTOR,
                WAD.wDivDown(WAD - LIQUIDATION_CURSOR.wMulDown(WAD - marketParams.lltv))
            );

            if (seizedAssets > 0) {
                repaidAssets =
                    seizedAssets.mulDivUp(collateralPrice, ORACLE_PRICE_SCALE).wDivUp(liquidationIncentiveFactor);
                repaidShares = repaidAssets.toSharesDown(market[id].totalBorrowAssets, market[id].totalBorrowShares);
            } else {
                repaidAssets = repaidShares.toAssetsUp(market[id].totalBorrowAssets, market[id].totalBorrowShares);
                seizedAssets =
                    repaidAssets.wMulDown(liquidationIncentiveFactor).mulDivDown(ORACLE_PRICE_SCALE, collateralPrice);
            }
        }

        position[id][borrower].borrowShares -= repaidShares.toUint128();
        market[id].totalBorrowShares -= repaidShares.toUint128();
        market[id].totalBorrowAssets = UtilsLib.zeroFloorSub(market[id].totalBorrowAssets, repaidAssets).toUint128();

        position[id][borrower].collateral -= seizedAssets.toUint128();

        uint256 badDebtShares;
        if (position[id][borrower].collateral == 0) {
            badDebtShares = position[id][borrower].borrowShares;
            uint256 badDebt = UtilsLib.min(
                market[id].totalBorrowAssets,
                badDebtShares.toAssetsUp(market[id].totalBorrowAssets, market[id].totalBorrowShares)
            );

            market[id].totalBorrowAssets -= badDebt.toUint128();
            market[id].totalSupplyAssets -= badDebt.toUint128();
            market[id].totalBorrowShares -= badDebtShares.toUint128();
            position[id][borrower].borrowShares = 0;
        }

        IERC20(marketParams.collateralToken).safeTransfer(msg.sender, seizedAssets);

        // `repaidAssets` may be greater than `totalBorrowAssets` by 1.
        emit EventsLib.Liquidate(id, msg.sender, borrower, repaidAssets, repaidShares, seizedAssets, badDebtShares);

        if (data.length > 0) INatriumLiquidateCallback(msg.sender).onNatriumLiquidate(repaidAssets, data);

        IERC20(marketParams.loanToken).safeTransferFrom(msg.sender, address(this), repaidAssets);

        return (seizedAssets, repaidAssets);
    }