Compound Liquidation Bot

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Update, April 15 2021: I've open-sourced a much better liquidation bot. See here.

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Update, November 27 2020: Compound has changed significantly since this code was written. For those of you forking it, please understand that it will not work out of the box. If you want it to be remotely competitive, you should look into the following:

• Frontrunning
• V2 CTokens vs V1 CTokens, and how that impacts whether an account is liquidatable and what assets should be repaid/seized
• Posting prices in the same transaction as the liquidation (only possible in a smart contract)

If you want additional resources, open an issue on the topic and I'll do what I can to help.

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This repository provides web3 boilerplate and the basic logic necessary to profitably call liquidateBorrow() on cToken smart contracts.

I've chosen to make it open source in the spirit of decentralization... and also because I no longer use it. I now call liquidateBorrow() from within a flash loan contract, which requires more gas (and therefore higher transaction fees). As such, I cannot profitably liquidate low-value (< 0.5 Ξ) accounts. This code (sometimes) can.

Support me by sending money for coffee: 0x321F954c22B9128BAac787C3241dae977cBBC2e0

Installation

npm install

You can also use yarn if you wish.

Usage

node main.js

You will also need to create a .env file with the following information:

• PUBLIC_KEY your wallet's address
• PRIVATE_KEY your wallet's private key (for signing txs)
• COMPOUND_ENDPOINT https://api.compound.finance/api/v2
• ETHPLORER_ENDPOINT https://api.ethplorer.io
• GAS_STATION_ENDPOINT https://ethgasstation.info/json/ethgasAPI.json
• WEB3_PROVIDER could be Infura, your own node... anything

If you want to run this in Docker or on Google Cloud Platform, I'm going to assume you know what you're doing. Configuration files are available.

How it works

Compound provides two very useful services: the Account Service and the cToken Service. These services provide information about all users and currencies currently on the protocol. The code in /compound/API.js fetches and processes this information before handing it off to main.js.

main.js also has handlers that retrieve data about current gas prices, close factors, the liquidation incentive, and your wallet balance (for each token).

With all of that information in hand, it's easy to determine whether a given user can be profitably liquidated. In pseudocode, the idea is this:

const user; // Item from array returned by AccountService API

let bestAssetToRepay = null;
let bestAssetToSeize = null;
let maxRepayable_Eth = 0.0;
let maxSeizable_Eth = 0.0;

user.tokens.forEach(token => {
  const repayable_Eth = token.borrowBalanceUnderlying * costInEth * closeFactor;
  const seizable_Eth = token.supplyBalanceUnderlying * costInEth / liquidationIncentive;

  if (
    repayable_Eth > maxRepayable_Eth &&
    seizable_Eth > maxSeizable_Eth
  ) {
    if (repayable_Eth <= maxSeizable_Eth) {
      // In this case, raising maxRepayable_Eth actually increases rewards
      // (maxSeizable_Eth is sufficient to maximize liquidation incentive)
      maxRepayable_Eth = repayable_Eth;
      bestAssetToRepay = token;
    } else {
      // In this case, raising maxRepayable_Eth wouldn't lead to increased rewards
      // so we increase maxSeizable_Eth instead
      maxSeizable_Eth = seizable_Eth;
      bestAssetToSeize = token;
    }
  } else if (repayable_Eth > maxRepayable_Eth) {
    maxRepayable_Eth = repayable_Eth;
    bestAssetToRepay = token;
  } else if (seizable_Eth > maxSeizable_Eth) {
    maxSeizable_Eth = seizable_Eth;
    bestAssetToSeize = token;
  }
  
  const amount = Math.min(maxRepayable_Eth, maxSeizable_Eth);
  const profitability = amount * (liquidationIncentive - 1.0);
  if (profitability > txFee && user.liquidity < 0) {
    bestAssetToRepay.liquidateBorrow(user.address, amount, bestAssetToSeize);
  }
});

Disclaimer

USE THIS CODE AT YOUR OWN RISK! There's no warranty, and I can't promise that you'll make money. Please do not trust random developers on the internet (even me).