Venus liquidation: From Threshold to Seizure

Liquidation Shortfall and the Eligible Account

A liquidation shortfall appears when oracle-valued debt exceeds the value of eligible collateral after the Comptroller applies each applicable liquidation threshold. The Comptroller is the contract that enforces account risk rules across lending markets. Supplied collateral enters the calculation through its underlying value, derived from balances of vTokens (receipt tokens for supplied assets) and their exchange rates. A falling collateral price, rising debt-asset price or accumulating interest can create a shortfall without another borrowing transaction.

The collateral factor governs borrowing capacity, while the liquidation threshold governs ordinary liquidation eligibility. Those limits can differ. An account can lose capacity for another loan before it becomes liquidatable. On BNB Chain Core, E-Mode makes effective risk settings depend on the account's selected pool and its markets. A standard liquidation may leave debt outstanding; a small-account settlement can clear borrowing records or recognize bad debt.

Liquidation Calls and Their Account Records

The liquidation interface connects the payer's repayment to the borrower's debt record and the collateral market's seizure operation within a liquidation transaction.

BNB Chain Core Routing

BNB Chain Core uses the Liquidator contract's liquidateBorrow interface. Its inputs identify the borrower, borrowed market, repayment amount and collateral market. For token debt, the payer supplies the borrowed underlying asset and authorizes the Liquidator to transfer it. The native BNB branch requires the transaction's attached BNB to equal the repayment amount. Borrower-specific restrictions can limit participation to allowed liquidators.

Beacon Market Routing

Core Pools that use the beacon lending engine expose ordinary liquidation through the borrowed vToken's liquidateBorrow. The payer authorizes that market to take the repayment token. The vToken accrues interest, invokes Comptroller policy checks, records repayment and calls the collateral market's seizure logic. Its liquidation entry point differs from BNB Chain Core's wrapper.

Vault Adapter Boundaries

InstitutionalLoanVault accepts health-based liquidation only through LiquidationAdapter, with debt, a liquidation-threshold shortfall and an eligible vault state. Those states are Lock, PendingSettlement and SettlementDeadlineExceeded. Its separate overdue liquidation path requires SettlementDeadlineExceeded. The adapter requires whitelisted liquidators for health-based calls and whitelisted settlers for overdue calls. Both routes need outstanding debt and repayment in the vault's supply asset. Actual repayment above the adapter's close-factor limit causes the call to fail. A completely paused vault rejects both routes. These vault rules don't follow the money-market account's Comptroller configuration.

Recorded Debt and Collateral

Repayment Record

In ordinary money-market liquidation, the RepayBorrow event identifies the payer, borrower and actual repayment amount, together with updated borrowing balances. The vToken's LiquidateBorrow event connects that repayment to the selected collateral market. A submitted amount or successful transaction receipt alone doesn't establish those account changes.

Seizure Record

The vToken's LiquidateBorrow event reports gross collateral in vToken units. The liquidator's final receipt can be smaller after the protocol allocation. Reconciliation therefore needs the borrower's collateral balance reduction and the recipient's credited amount. A receipt-token quantity and its underlying-asset value describe different units, even when they refer to the same seizure.

How Much Debt Can One Standard Liquidation Repay?

A standard liquidation can repay up to the configured close factor multiplied by the borrower's debt in the selected borrowed market.

The close factor limits repayment against the selected market's debt, not the account's combined borrowing value. Interest accrual changes that debt balance. A liquidator also needs sufficient eligible collateral in the chosen seizure market. The maximum permitted repayment doesn't establish how much debt will actually be repaid or whether the remaining position will pass its liquidation check.

Another liquidation requires the position to remain eligible under the rules that apply when that call executes.

Beacon Engine Liquidation Parameters

The beacon lending engine exposes configurable parameters that determine eligibility, repayment limits and collateral allocation. Their stored values belong to the relevant Comptroller or vToken. The table describes the v4.4.0 contract family's rules; it doesn't substitute one deployment's settings for another's.

Collateral Valuation and the Protocol Share

The seizure calculation converts actual debt repayment into a gross collateral claim using oracle prices, the applicable incentive and the collateral exchange rate. Repayment uses the borrowed underlying asset's units; seizure uses collateral vToken units. Token decimals and integer rounding matter when an integration reproduces the contract calculation.

BNB Core Bonus Allocation

The v10.3.0 BNB Core Liquidator applies treasuryPercentMantissa to the bonus portion of seized collateral. It obtains the effective incentive for the borrower and collateral market, then credits the remaining vTokens to the liquidator. Its protocol allocation calculation differs from the beacon vToken's protocolSeizeShareMantissa calculation.

Redemption and Net Proceeds

Seized vTokens represent a collateral claim, so receiving them doesn't necessarily deliver the underlying token immediately. Redemption remains subject to the market's cash and policy conditions. BNB Core can retain its protocol-share vTokens for later redemption when that redemption fails. A liquidator's economic proceeds also depend on redemption, trading costs and transaction fees, beyond the gross incentive.

Forced Liquidation of a Selected Borrow

A forced-liquidation flag permits repayment of the affected market's entire debt without requiring ordinary account shortfall or applying the close-factor cap. BNB Core supports market-wide flags and borrower-specific flags within a market. The beacon Comptroller supports the market-wide flag. Other listing, pause and seizure constraints still apply. The flag concerns the selected debt market; it doesn't automatically authorize liquidation of every loan that the account owes.

Small-Account Settlement and Bad Debt

The beacon engine routes accounts with limited collateral through liquidateAccount or healAccount, subject to liquidation shortfall and the configured collateral boundary. In v4.4.0, ordinary liquidation requires total collateral strictly above minLiquidatableCollateral. The small-account paths accept collateral at or below that limit. This comparison uses oracle-valued collateral, not the liquidation-threshold-weighted collateral value.

liquidateAccount accepts a batch of repayment and collateral orders when collateral can cover the debt plus the liquidation incentive. Its coverage test requires collateral value to exceed that incentive-adjusted debt value. The function bypasses the ordinary close-factor restriction and requires all entered-market borrow balances to reach zero. An incomplete repayment batch fails that final condition.

healAccount applies when small-account collateral is at most the debt value multiplied by the liquidation incentive. The engine calculates the repayable proportion by dividing collateral value by the product of debt value and the incentive. It seizes the entered collateral and uses that proportion to calculate each market's repayment. Healing clears the borrower's market debt balances. The beacon engine records any unpaid remainder after healing as market bad debt.

The retired standalone isolated pools retain their own market states. Their retirement doesn't erase debt or guarantee that liquidation actions remain enabled.

Accrual, Prices and Failed Liquidation Calls

Interest accrual updates the balances that a liquidation uses, so stored debt and collateral exchange rates can lag the execution calculation. Oracle failures can prevent a valid account valuation. Repayment, liquidation and seizure also have distinct pause controls. A listed borrowed market doesn't establish that the selected collateral market permits seizure. A pending call can lose eligibility after another repayment, liquidation or price change.

Transaction inclusion alone doesn't prove that collateral moved. Legacy vToken interfaces can report failures through return codes and Failure events. The BNB Liquidator checks return codes on its token and VAI branches. Its native-asset branch still calls for reconciliation against the actual repayment and seizure events. A reverted transaction doesn't retain its attempted debt reduction or collateral transfer.

Can Repayment Stop a Pending Liquidation?

A repayment that removes the account's liquidation shortfall before a standard money-market liquidation executes can make that liquidation fail its eligibility check. The market must accept repayment, and the reduction must cover the shortfall under the prices and risk settings used at execution. A token approval alone doesn't reduce debt. Forced-liquidation flags remain a separate exception.

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Additional eligible collateral can also change account liquidity, subject to supply caps, market permissions and collateral settings. Removing a health shortfall doesn't remove an overdue vault's deadline-based liquidation condition. Repayment funded with the borrowed asset reduces debt without a liquidation incentive. Liquidation removes collateral, including the additional collateral value determined by its incentive.