Liquidators

Varla uses three independent liquidation mode contracts — each authorized by VarlaCore via AccessManager RBAC. There is no router; each contract is a standalone entry point for its liquidation strategy.

contracts/VarlaLiquidator.sol — simple, multi-collateral, and bad-debt liquidation
contracts/liquidators/VarlaLiquidatorBase.sol — shared abstract base
contracts/liquidators/VarlaMergeLiquidator.sol — binary merge-assisted liquidation
contracts/liquidators/VarlaConvertLiquidator.sol — NegRisk convert-assisted liquidation

Architecture

VarlaCore (AccessManager RBAC authorizes all three)
       │
       ├── VarlaLiquidator
       │      ├─ liquidate()       — single-position seizure
       │      ├─ liquidateMulti()  — multi-collateral seizure
       │      └─ liquidateBadDebt() — bad-debt resolution
       │
       ├── VarlaMergeLiquidator
       │      └─ calls IMarketAdapter.convert() to merge
       │         YES+NO → collateral, repays debt from proceeds
       │
       └── VarlaConvertLiquidator
              └─ calls NegRisk adapter to convert positions,
                 repays debt from converted collateral

All three inherit: VarlaLiquidatorBase (abstract)
  └─ shared: health checks, bonus math, fee collection

Each liquidator contract calls VarlaCore.seizeCollateral() and VarlaCore.repayOnBehalfFromLiquidation() — functions that are restricted via AccessManager RBAC to authorized liquidator contracts only.

VarlaLiquidator (Simple / Multi / Bad-Debt)

The primary liquidation contract. Handles three modes:

Function	Description
`liquidate(user, positionId, debtToCover)`	Permissionless — seize a single collateral position from an unhealthy borrower
`liquidateMulti(user, positionIds, debtToCover)`	Permissionless — seize across multiple collateral positions in one transaction
`liquidateBadDebt(user, maxRepayAmount)`	Permissionless — liquidate positions where debt exceeds collateral value (at a 5% discount)
`resolveBadDebtWithReserve(user, expectedScaledDebt)`	Admin/keeper — seize collateral to treasury and write off remaining debt via pool reserve

Liquidator Modes

VarlaMergeLiquidator

Binary merge-assisted liquidation — used when a borrower holds both YES and NO positions of a binary market. The liquidator calls a platform-specific market adapter (IMarketAdapter.convert()) to merge complementary position tokens back into the underlying collateral (e.g. USDC), then uses the proceeds to repay debt.

Platform adapters: PolymarketCtfAdapter (Polygon) and OpinionCtfExecutionEngineAdapter (BSC).

VarlaConvertLiquidator

NegRisk convert-assisted liquidation — used for NegRisk market positions on Polymarket. The liquidator calls the PolymarketNegRiskMergeAdapter to convert NegRisk positions back into collateral, then repays debt from the converted proceeds.

VarlaLiquidatorBase (Abstract)

Shared logic inherited by all three liquidator contracts:

Responsibility	Description
Health factor validation	Confirms HF < 1.0 before proceeding
Bonus calculation	Computes liquidation bonus based on tier config and current HF
Dust checks	Ensures remaining debt/collateral don't fall below dust thresholds
Fee collection	Sends protocol liquidation fee to treasury
Staking rebate	Optional fee reduction for VRLA stakers via VarlaStaking integration

Liquidation Bonus

The liquidation bonus is dynamic — it increases as the health factor drops further below 1.0, up to a per-tier maximum. This is configured in VarlaCore's TierLiquidationConfig.

Parameter	Source
`maxLiquidationBonusBps`	Per risk tier in VarlaCore
`liquidationFeeBps`	Per risk tier — protocol fee on liquidations
`healthFactorForMaxBonus`	HF threshold where max bonus kicks in
`targetHealthFactor`	HF target after partial liquidation

✦ Key Takeaways

Liquidations are permissionless — anyone can call liquidate() on an unhealthy position
Three independent mode contracts: simple/multi/bad-debt, merge, and convert
All authorized by VarlaCore via AccessManager RBAC (no router pattern)
Bonus scales dynamically with how far HF drops below 1.0
Protocol takes a fee (liquidationFeeBps) on each liquidation
Dust thresholds prevent tiny residual positions after liquidation