Liquidation Flow

End-to-end execution flow for liquidating unhealthy positions in Aave V3.

Quick Reference

Aspect	Details
Entry Point	`Pool.liquidationCall(collateralAsset, debtAsset, user, debtToCover, receiveAToken)`
Key Transformations	Debt Value → Collateral Amount
State Changes	Burn debt, burn/transfer collateral
Events Emitted	`LiquidationCall`, `ReserveUsedAsCollateralEnabled` (conditional)

Flow Diagram

flowchart TD
    %% Styling definitions
    classDef validation fill:#ffcccc,stroke:#ff0000,stroke-width:2px
    classDef transformation fill:#ccffcc,stroke:#00aa00,stroke-width:2px
    classDef storage fill:#ccccff,stroke:#0000ff,stroke-width:2px
    classDef event fill:#ffffcc,stroke:#aaaa00,stroke-width:2px
    classDef error fill:#ff0000,stroke:#000000,color:#fff
    classDef critical stroke:#ff0000,stroke-width:3px

    %% Entry point
    Entry["Pool.liquidationCall<br/>collateralAsset, debtAsset,<br/>user, debtToCover,<br/>receiveAToken"] --> Execute["LiquidationLogic<br/>executeLiquidationCall"]
    
    subgraph StateUpdate ["1. State Updates"]
        direction TB
        UpdateState["ReserveLogic<br/>updateState (debt)<br/>Updates indexes"]
    end
    
    subgraph HealthCheck ["2. Health Factor / Safety Checks"]
        direction TB
        CalcAccount["GenericLogic<br/>calculateUserAccountData<br/>Calculates HF, totalDebt"] --> Validate["ValidationLogic<br/>validateLiquidationCall<br/>CRITICAL: HF < 1.0"]
        class Validate validation
        class Validate critical
    end
    
    subgraph Calculations ["3. Liquidation Calculations"]
        direction TB
        Validate --> CalcDebt["_calculateDebt<br/>Gets variable + stable debt"]
        
        CalcDebt --> CalcConfig["_getConfigurationData<br/>closeFactor: HF<0.95=100%<br/>HF>=0.95=50%"]
        
        CalcConfig --> CalcCollateral["_calculateAvailableCollateralToLiquidate<br/>KEY: collateralAmount =<br/>debtToCover.percentMul(bonus)<br/>.wadToRay().rayDiv(price)"]
        class CalcCollateral transformation
    end
    
    Execute --> StateUpdate
    StateUpdate --> HealthCheck
    HealthCheck --> Calculations
    
    CalcCollateral --> BurnDebt["_burnDebtTokens<br/>CRITICAL: Burns debt"]
    
    subgraph TokenBurn ["4. Debt Token Burn"]
        direction TB
        BurnDebt --> VarDebtBurn{"Variable Debt<br/>>= debtToCover?"}
        
        VarDebtBurn -->|Yes| VDBurn["VariableDebtToken<br/>burn"]
        
        VarDebtBurn -->|No| VarStableBurn["Burn all variable +<br/>partial stable"]
        
        VarStableBurn --> VDMint["VariableDebtToken<br/>burn(userVariableDebt)"]
        
        VDMint --> SDMint["StableDebtToken<br/>burn(remaining)"]
        
        VDBurn --> IsoLogic
        SDMint --> IsoLogic
    end
    
    subgraph CollateralMgmt ["5. Collateral Management"]
        direction TB
        IsoLogic["IsolationModeLogic<br/>updateIsolatedDebtIfIsolated"]
        class IsoLogic storage
        
        IsoLogic --> UpdateRates["ReserveLogic<br/>updateInterestRates"]
        
        UpdateRates --> ATokensCheck{"receiveAToken?"}
        
        ATokensCheck -->|Yes| LiquidateATokens["_liquidateATokens<br/>Transfer aTokens"]
        
        ATokensCheck -->|No| BurnCollateral["_burnCollateralATokens<br/>Burn aTokens + transfer"]
        
        LiquidateATokens --> CollatValidate["ValidationLogic<br/>validateUseAsCollateral"]
        class CollatValidate validation
        
        CollatValidate --> EnableCollat["UserConfig<br/>setUsingAsCollateral"]
        class EnableCollat storage
        
        EnableCollat --> CollatEvent["EMIT<br/>ReserveUsedAsCollateralEnabled"]
        class CollatEvent event
        
        BurnCollateral --> BurnAToken["AToken<br/>burn"]
        class BurnAToken transformation
        
        BurnAToken --> TransferUnderlying["IERC20<br/>safeTransfer"]
        class TransferUnderlying storage
    end
    
    TokenBurn --> CollateralMgmt
    
    CollatEvent --> RepayTransfer["IERC20<br/>safeTransferFrom<br/>Liquidator pays debt"]
    class RepayTransfer storage
    
    TransferUnderlying --> RepayTransfer
    
    RepayTransfer --> FinalEvent["EMIT<br/>LiquidationCall"]
    class FinalEvent event
    
    %% Error annotations
    %% CRITICAL: HF must be < 1.0 - validation reverts otherwise
    %% CRITICAL: Collateral calculation applies liquidation bonus
    %% CRITICAL: Debt token burn is irreversible
    %% CRITICAL: Close factor limits liquidation amount
    
    %% Link styles for critical paths
    linkStyle 10 stroke:#ff0000,stroke-width:3px
    linkStyle 16 stroke:#ff0000,stroke-width:3px
    linkStyle 22 stroke:#ff0000,stroke-width:3px

Step-by-Step Execution