Hands-on Exercise: Flash Loan based Liquidation

Tips

• If not enough profit after calling liquidate once, next time liquidate up to 49%, then liquidate again Helpful resource: https://github.com/haydenshively/Nantucket/blob/master/contracts/Liquidator.sol

Quickstart

1. Start docker desktop
2. git clone https://github.com/AlbertSu123/defi-mooc-lab.git
3. In the first terminal, run docker build -t defi-mooc-lab2 .
4. Then run, docker run -e ALCHE_API="https://eth-mainnet.alchemyapi.io/v2/HJ_i2RGc4L49NXkuwuST53fMYye2LGeB" -it defi-mooc-lab2 /bin/sh
5. Open a second terminal, run docker exec -it CONTAINER_ID /bin/bash. You can get CONTAINER_ID by running docker ps in your first terminal
6. To run tests, go to your second terminal and run npm test
7. To copy files to your second terminal, run docker cp path/to/file CONTAINER_ID:/destination/path. ie docker cp test/liquidation.js 46409c5f36f0:/lab2/test

Prerequisite

• You need to register an account on https://www.alchemy.com/ for access to an archive Ethereum node.

• You need to prepare the nodeJS environment for the project yourself, or have docker installed on your machine.

Requirements

• The smart contract should allow you to perform a flash loan, a liquidation, and an asset exchange in one blockchain transaction.

• To ease marking, we require your contract to provide a unified interface operate. By calling operate, the flash loan, liquidation, and exchange should be executed properly. You are allowed to "hardcode" the execution logic and parameters in the operate function.

function operate() external;

Test case

You are expected to liquidate 0x59CE4a2AC5bC3f5F225439B2993b86B42f6d3e9F on Aave V2 which was liquidated at block 12489620. Check out the original liquidation transaction.

Commands

To test your contract:

1. docker build -t defi-mooc-lab2 .
2. docker run -e ALCHE_API="$YOUR ALCHEMY ETHEREUM MAINNET API" -it defi-mooc-lab2 npm test

Background

We provide the following background information for this exercise.

Aave liquidation

To trigger a liquidation on Aave, you need to call a public function liquidationCall provided by the Aave smart contracts. In the function, you can specify user representing the borrowing position you would like to liquidate, debtAsset, the cryptocurrency you would like to repay (let's say token D), and collateralAsset, the collateral cryptocurrency you would like claim from the borrowing position (let's say token C). You also specify the amount of debt you want to repay, debtToCover.

function liquidationCall(
    address collateralAsset,
    address debtAsset,
    address user,
    uint256 debtToCover,
    bool receiveAToken
  ) external;

By calling this function, you then repay some amount of token D to Aave and in return, some token C is sent to your account.

You should make sure that the user is in a liquidatable state. Otherwise, the aave smart contract would revert your transaction and you would pay transaction fees for an unsuccessful liquidation.