mukan-ignite/docs/versioned_docs/version-v0.26/02-guide/05-loan/06-liquidate.md

Liquidate loan

The LiquidateLoan method is a function that allows the lender to sell off the collateral belonging to the borrower in the event that the borrower has failed to repay the loan by the specified deadline. This process is known as "liquidation" and is typically carried out as a way for the lender to recoup their losses in the event that the borrower is unable to fulfill their repayment obligations.

During the liquidation process, the collateral tokens that have been pledged by the borrower as security for the loan are transferred from the borrower's account to the lender's account. This transfer is initiated by the lender and is typically triggered when the borrower fails to repay the loan by the agreed upon deadline. Once the collateral has been transferred, the lender can then sell it off in order to recoup their losses and compensate for the unpaid loan.

Keeper method

package keeper

import (
	"context"
	"fmt"
	"strconv"

	sdk "github.com/cosmos/cosmos-sdk/types"
	sdkerrors "github.com/cosmos/cosmos-sdk/types/errors"

	"loan/x/loan/types"
)

func (k msgServer) LiquidateLoan(goCtx context.Context, msg *types.MsgLiquidateLoan) (*types.MsgLiquidateLoanResponse, error) {
	ctx := sdk.UnwrapSDKContext(goCtx)
	loan, found := k.GetLoan(ctx, msg.Id)
	if !found {
		return nil, sdkerrors.Wrapf(sdkerrors.ErrKeyNotFound, "key %d doesn't exist", msg.Id)
	}
	if loan.Lender != msg.Creator {
		return nil, sdkerrors.Wrap(sdkerrors.ErrUnauthorized, "Cannot liquidate: not the lender")
	}
	if loan.State != "approved" {
		return nil, sdkerrors.Wrapf(types.ErrWrongLoanState, "%v", loan.State)
	}
	lender, _ := sdk.AccAddressFromBech32(loan.Lender)
	collateral, _ := sdk.ParseCoinsNormalized(loan.Collateral)
	deadline, err := strconv.ParseInt(loan.Deadline, 10, 64)
	if err != nil {
		panic(err)
	}
	if ctx.BlockHeight() < deadline {
		return nil, sdkerrors.Wrap(types.ErrDeadline, "Cannot liquidate before deadline")
	}
	err = k.bankKeeper.SendCoinsFromModuleToAccount(ctx, types.ModuleName, lender, collateral)
	if err != nil {
		return nil, err
	}
	loan.State = "liquidated"
	k.SetLoan(ctx, loan)
	return &types.MsgLiquidateLoanResponse{}, nil
}

LiquidateLoan takes in a context and a types.MsgLiquidateLoan message as input and returns a types.MsgLiquidateLoanResponse message and an error as output.

The function first retrieves a loan using the GetLoan method and the Id field of the input message. If the loan is not found, it returns an error using the sdkerrors.Wrap function and the sdkerrors.ErrKeyNotFound error code.

Next, the function checks that the Creator field of the input message is the same as the Lender field of the loan. If they are not the same, it returns an error using the sdkerrors.Wrap function and the sdkerrors.ErrUnauthorized error code.

The function then checks that the State field of the loan is equal to "approved". If it is not, it returns an error using the sdkerrors.Wrapf function and the types.ErrWrongLoanState error code.

The function then converts the Lender field of the loan to an address using the sdk.AccAddressFromBech32 function and the Collateral field to coins using the sdk.ParseCoinsNormalized function. It also converts the Deadline field to an integer using the strconv.ParseInt function. If this function returns an error, it panics.

Finally, the function checks that the current block height is greater than or equal to the deadline. If it is not, it returns an error using the sdkerrors.Wrap function and the types.ErrDeadline error code. If all checks pass, the function uses the bankKeeper.SendCoinsFromModuleToAccount method to transfer the collateral from the module account to the lender's account and updates the State field of the loan to "liquidated". It then stores the updated loan using the SetLoan method and returns a types.MsgLiquidateLoanResponse message with no error.

Register a custom error

package types

import (
	sdkerrors "github.com/cosmos/cosmos-sdk/types/errors"
)

var (
	ErrWrongLoanState = sdkerrors.Register(ModuleName, 2, "wrong loan state")
	// highlight-next-line
	ErrDeadline = sdkerrors.Register(ModuleName, 3, "deadline")
)