Setting Up Automated Alerts for Your Borrowing Positions

Detailed Instructions

First, you must define your liquidation risk thresholds and identify the data sources for your positions. The key metric is the Health Factor (HF), a numerical representation of your loan's safety. A health factor below 1.0 means your position is eligible for liquidation.

• Sub-step 1: Determine Alert Levels: Set multiple Health Factor thresholds. For example, set a Warning Alert at HF < 1.5 and a Critical Alert at HF < 1.2. This gives you time to act before liquidation.
• Sub-step 2: Identify Your Protocol and Wallet: Note the DeFi protocol (e.g., Aave V3 on Ethereum Mainnet) and your public wallet address (e.g., 0x742d35Cc6634C0532925a3b844Bc9e0a3d3c1e1f).
• Sub-step 3: Select Data Provider: Choose an API to fetch real-time data. Use a service like The Graph for historical queries or a node provider like Alchemy/Infura for live RPC calls.

Tip: Consider also monitoring the Loan-to-Value (LTV) ratio and the price volatility of your collateral assets for a more comprehensive view.

Detailed Instructions

Develop a script that queries on-chain data to calculate your current Health Factor. This involves calling the protocol's smart contract functions. Use the Aave V3 protocol as a common example.

• Sub-step 1: Set Up Environment: Initialize a Node.js/ Python project and install necessary libraries like web3.js or ethers.js and the Aave SDK.
• Sub-step 2: Query User Account Data: Call the getUserAccountData function on the Aave Pool contract. This returns key values including healthFactor.
• Sub-step 3: Execute the Query: Here is a simplified JavaScript example using ethers:

javascriptCopy
const { ethers } = require('ethers');
const provider = new ethers.providers.JsonRpcProvider('YOUR_RPC_URL');
const aavePoolAddress = '0x87870Bca3F3fD6335C3F4ce8392D69350B4fA4E2'; // Aave V3 Pool
const aavePoolABI = ["function getUserAccountData(address user) view returns (uint256, uint256, uint256, uint256, uint256, uint256)"];
const poolContract = new ethers.Contract(aavePoolAddress, aavePoolABI, provider);

async function getHealthFactor(userAddress) {
    const data = await poolContract.getUserAccountData(userAddress);
    // healthFactor is returned as a uint256, divide by 1e18 for readable value
    const healthFactor = Number(data[5]) / 1e18;
    console.log(`Current Health Factor: ${healthFactor}`);
    return healthFactor;
}

Tip: Run this script locally first to verify it returns correct data for your address before automating it.

Detailed Instructions

Automate the execution of your query script and integrate it with an alerting service. Cron jobs are ideal for scheduling, and services like Twilio (SMS), Discord Webhooks, or Telegram Bots are perfect for notifications.

• Sub-step 1: Schedule the Script: Use a cron job on a server or a serverless function (AWS Lambda, Google Cloud Functions) to run your script every 5-10 minutes. A cron expression for every 5 minutes is */5 * * * *.
• Sub-step 2: Add Alert Logic: In your script, add conditional statements that trigger alerts. For example: if (healthFactor < 1.2) { sendCriticalAlert(); }.
• Sub-step 3: Configure Notification Channel: Set up the alert sender. For a Discord webhook, you would HTTP POST a JSON payload to your unique webhook URL.

javascriptCopy
// Example snippet for Discord alert
const fetch = require('node-fetch');
async function sendDiscordAlert(hfValue) {
    const webhookURL = 'https://discord.com/api/webhooks/YOUR_WEBHOOK_ID/YOUR_TOKEN';
    const message = {
        content: `🚨 CRITICAL ALERT! Health Factor is ${hfValue.toFixed(2)}!`
    };
    await fetch(webhookURL, {
        method: 'POST',
        headers: { 'Content-Type': 'application/json' },
        body: JSON.stringify(message)
    });
}

Tip: Include relevant details in the alert: HF value, collateral assets, and a link to the protocol's UI for quick action.

Detailed Instructions

Thoroughly test the system in a controlled environment and deploy it. Most importantly, establish a clear response protocol so you know exactly what to do when an alert is received.

• Sub-step 1: Conduct End-to-End Testing: Simulate a dropping Health Factor by using a testnet (e.g., Sepolia) or mocking API responses. Verify that alerts fire correctly at your set thresholds and are delivered to all configured channels (Email, SMS, Discord).
• Sub-step 2: Deploy Monitoring Service: Move your script and scheduler to a reliable, always-on environment. Using a cloud VM with PM2 or a managed serverless function is recommended for uptime.
• Sub-step 3: Document the Response Protocol: Create a clear action plan. This should include:
  • Immediate Action: If HF < Critical Threshold, prepare to add collateral or repay debt immediately.
  • Tool Preparation: Have a pre-approved transaction ready in your wallet (e.g., on Aave's UI) with the correct amount of stablecoins or collateral.
  • Fallback Alert: Designate a secondary person to receive alerts in case you are unavailable.

Tip: Regularly review and adjust your thresholds based on market volatility and update your script if the protocol's contract addresses or ABIs change.

Detailed Instructions

First, you must define the precise Health Factor thresholds and cost metrics that matter to your strategy. The Health Factor is the most critical risk indicator; a value below 1.0 means your position can be liquidated.

• Sub-step 1: Set Primary Liquidation Alerts: Determine your warning thresholds. For example, set a Critical Alert for a Health Factor below 1.2 and a Warning Alert for below 1.5.
• Sub-step 2: Configure Cost & Efficiency Alerts: Monitor borrowing costs. Set alerts for when the variable borrow APR on your asset (e.g., USDC) exceeds a specific value like 8% or when a better lending rate becomes available on another platform.
• Sub-step 3: Define Position-Specific Rules: If you have multiple positions, create rules for each. For a WBTC collateralized loan, you might want a tighter threshold due to volatility compared to a stablecoin-collateralized loan.

Tip: Use a staging environment or testnet to simulate market movements and verify your alert logic triggers correctly before deploying with real funds.

Detailed Instructions

Your alerts are only as good as their data. You must integrate with oracle services like Chainlink and protocol-specific subgraphs or APIs to fetch live market information.

• Sub-step 1: Fetch Asset Prices: Use a Chainlink price feed to get the real-time price of your collateral (e.g., ETH) and borrowed asset. For mainnet, the ETH/USD feed address is 0x5f4eC3Df9cbd43714FE2740f5E3616155c5b8419.
• Sub-step 2: Query Protocol State: Use Aave's subgraph or direct contract calls to fetch your position's dynamic data. A GraphQL query to get a user's health factor might look like:

graphqlCopy
query {
  user(id: "0xYourAddress") {
    healthFactor
  }
}

• Sub-step 3: Pull Interest Rate Data: Call the getReserveData function on the Aave LendingPool contract (0x7d2768dE32b0b80b7a3454c06BdAc94A69DDc7A9) for the reserve asset to get current variable and stable borrow rates.

Tip: Implement data aggregation and sanity checks to defend against oracle manipulation or API failures, ensuring your alerts are based on consensus values.

Detailed Instructions

This step involves coding the monitoring bot or keeper network script that will evaluate your rules and trigger actions. You can use OpenZeppelin Defender for a managed service or build a custom keeper.

• Sub-step 1: Choose an Automation Framework: For a custom solution, use a script with ethers.js that runs on a cron job. For a decentralized approach, use Chainlink Keepers by registering an Upkeep contract.
• Sub-step 2: Implement the Check-Upkeep Logic: Write the function that performs the check. For a Chainlink Keeper, it would look like:

solidityCopy
function checkUpkeep(bytes calldata) external view override returns (bool upkeepNeeded, bytes memory) {
    uint256 healthFactor = getUserHealthFactor(msg.sender);
    upkeepNeeded = healthFactor < 1.2 ether; // 1.2 in 18 decimals
    return (upkeepNeeded, "");
}

• Sub-step 3: Define the Perform-Upkeep Action: This function executes when a threshold is breached. The action could be calling a notification API, automatically depositing more collateral, or even initiating a safe repayment.

Tip: Always include a circuit breaker or pause function in your automation contracts to manually intervene if the logic behaves unexpectedly during extreme market events.

Detailed Instructions

An unseen alert is useless. Configure a robust system that pushes notifications through several channels based on severity.

• Sub-step 1: Set Up Priority Tiers: Route alerts by urgency. Critical alerts (Health Factor < 1.2) should trigger SMS (via Twilio) and phone calls. Warning alerts (Health Factor < 1.5) can go to Telegram or Discord webhooks.
• Sub-step 2: Implement Webhook Endpoints: Create secure endpoints to receive alerts from your bot. A Discord webhook URL looks like https://discord.com/api/webhooks/123456/abc123. Your bot would send a POST request with a JSON payload containing the alert details.
• Sub-step 3: Add On-Chain & Dashboard Visibility: For transparency, emit an event from your alert contract and log the alert. Also, integrate with a dashboard like DeBank or Zapper to visualize your position health alongside the alerts.

Tip: Regularly test your notification channels with non-critical alerts (e.g., weekly test pings) to ensure the entire pipeline—from on-chain event to your phone—is operational and reliable.