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optimize _calcSurplusAndCap() in LiquidationLibrary #687

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merged 5 commits into from
Oct 13, 2023
Merged

optimize _calcSurplusAndCap() in LiquidationLibrary #687

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f8cf293
optimize _calcSurplusAndCap() in LiquidationLibrary
rayeaster Oct 11, 2023
8679c33
feat: simplify logic + assert
GalloDaSballo Oct 11, 2023
e637a39
chore: partial liq
GalloDaSballo Oct 11, 2023
9744d08
chore: prettier
GalloDaSballo Oct 11, 2023
cf0a6e9
fix liquidation test using partialLiquidation for full liquidation
rayeaster Oct 12, 2023
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105 changes: 66 additions & 39 deletions packages/contracts/contracts/LiquidationLibrary.sol
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Original file line number Diff line number Diff line change
Expand Up @@ -237,12 +237,15 @@ contract LiquidationLibrary is CdpManagerStorage {
);

{
(_cappedColPortion, _collSurplus, _debtToRedistribute) = _calculateSurplusAndCap(
(
_cappedColPortion,
_collSurplus,
_debtToRedistribute
) = _calculateFullLiquidationSurplusAndCap(
_liqState.ICR,
_liqState.price,
_totalDebtToBurn,
_totalColToSend,
true
_totalColToSend
);
if (_collSurplus > 0) {
// due to division precision loss, should be zero surplus in normal mode
Expand Down Expand Up @@ -308,12 +311,15 @@ contract LiquidationLibrary is CdpManagerStorage {

// avoid stack too deep
{
(_cappedColPortion, _collSurplus, _debtToRedistribute) = _calculateSurplusAndCap(
(
_cappedColPortion,
_collSurplus,
_debtToRedistribute
) = _calculateFullLiquidationSurplusAndCap(
_recoveryState.ICR,
_recoveryState.price,
_totalDebtToBurn,
_totalColToSend,
true
_totalColToSend
);
if (_collSurplus > 0) {
collSurplusPool.increaseSurplusCollShares(_borrower, _collSurplus);
Expand Down Expand Up @@ -389,12 +395,11 @@ contract LiquidationLibrary is CdpManagerStorage {
uint256 newDebt = _debtAndColl.entireDebt - _partialDebt;

// credit to https://arxiv.org/pdf/2212.07306.pdf for details
(uint256 _partialColl, uint256 newColl, ) = _calculateSurplusAndCap(
(uint256 _partialColl, uint256 newColl, ) = _calculatePartialLiquidationSurplusAndCap(
_partialState.ICR,
_partialState.price,
_partialDebt,
_debtAndColl.entireColl,
false
_debtAndColl.entireColl
);

// early return: if new collateral is zero, we have a full liqudiation
Expand Down Expand Up @@ -525,45 +530,67 @@ contract LiquidationLibrary is CdpManagerStorage {
);
}

// Function that calculates the amount of collateral to send to liquidator (plus incentive) and the amount of collateral surplus
function _calculateSurplusAndCap(
// Partial Liquidation Cap Logic
function _calculatePartialLiquidationSurplusAndCap(
uint256 _ICR,
uint256 _price,
uint256 _totalDebtToBurn,
uint256 _totalColToSend,
bool _fullLiquidation
)
private
view
returns (uint256 cappedColPortion, uint256 collSurplus, uint256 debtToRedistribute)
{
// Calculate liquidation incentive for liquidator:
// If ICR is less than 103%: give away 103% worth of collateral to liquidator, i.e., repaidDebt * 103% / price
// If ICR is more than 103%: give away min(ICR, 110%) worth of collateral to liquidator, i.e., repaidDebt * min(ICR, 110%) / price
uint256 _totalColToSend
) private view returns (uint256 toLiquidator, uint256 collSurplus, uint256 debtToRedistribute) {
uint256 _incentiveColl;

// CLAMP
if (_ICR > LICR) {
// Cap at 10%
_incentiveColl = (_totalDebtToBurn * (_ICR > MCR ? MCR : _ICR)) / _price;
} else {
if (_fullLiquidation) {
// for full liquidation, there would be some bad debt to redistribute
_incentiveColl = collateral.getPooledEthByShares(_totalColToSend);
uint256 _debtToRepay = (_incentiveColl * _price) / LICR;
debtToRedistribute = _debtToRepay < _totalDebtToBurn
? _totalDebtToBurn - _debtToRepay
: 0;
// now CDP owner should have zero surplus to claim
cappedColPortion = _totalColToSend;
} else {
// for partial liquidation, new ICR would deteriorate
// since we give more incentive (103%) than current _ICR allowed
_incentiveColl = (_totalDebtToBurn * LICR) / _price;
}
// Min 103%
_incentiveColl = (_totalDebtToBurn * LICR) / _price;
}
if (cappedColPortion == 0) {
cappedColPortion = collateral.getSharesByPooledEth(_incentiveColl);

toLiquidator = collateral.getSharesByPooledEth(_incentiveColl);

/// @audit MUST be like so, else we have debt redistribution, which we assume cannot happen in partial
assert(toLiquidator < _totalColToSend); // Assert is correct here for Echidna

/// Because of above we can subtract
collSurplus = _totalColToSend - toLiquidator; // Can use unchecked but w/e
}

function _calculateFullLiquidationSurplusAndCap(
uint256 _ICR,
uint256 _price,
uint256 _totalDebtToBurn,
uint256 _totalColToSend
) private view returns (uint256 toLiquidator, uint256 collSurplus, uint256 debtToRedistribute) {
uint256 _incentiveColl;

if (_ICR > LICR) {
_incentiveColl = (_totalDebtToBurn * (_ICR > MCR ? MCR : _ICR)) / _price;

// Convert back to shares
toLiquidator = collateral.getSharesByPooledEth(_incentiveColl);
} else {
// for full liquidation, there would be some bad debt to redistribute
_incentiveColl = collateral.getPooledEthByShares(_totalColToSend);

// Since it's full and there's bad debt we use spot conversion to
// Determine the amount of debt that willl be repaid after adding the LICR discount
// Basically this is buying underwater Coll
// By repaying debt at 3% discount
// Can there be a rounding error where the _debtToRepay > debtToBurn?
uint256 _debtToRepay = (_incentiveColl * _price) / LICR;

debtToRedistribute = _debtToRepay < _totalDebtToBurn
? _totalDebtToBurn - _debtToRepay // Bad Debt (to be redistributed) is (CdpDebt - Repaid)
: 0; // Else 0 (note we may underpay per the comment above, althought that may be imaginary)

// now CDP owner should have zero surplus to claim
toLiquidator = _totalColToSend;
}
cappedColPortion = cappedColPortion < _totalColToSend ? cappedColPortion : _totalColToSend;
collSurplus = (cappedColPortion == _totalColToSend) ? 0 : _totalColToSend - cappedColPortion;

toLiquidator = toLiquidator < _totalColToSend ? toLiquidator : _totalColToSend;
collSurplus = (toLiquidator == _totalColToSend) ? 0 : _totalColToSend - toLiquidator;
}

// --- Batch liquidation functions ---
Expand Down
1 change: 1 addition & 0 deletions packages/contracts/specs/PROPERTIES.md
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Expand Up @@ -108,6 +108,7 @@ List of properties of the eBTC protocol, following the categorization by [Certor
| L-14 | If the RM grace period is set and we're in recovery mode, new actions that keep the system in recovery mode should not change the cooldown timestamp | High Level | ✅ |
| L-15 | The RM grace period should set if a BO/liquidation/redistribution makes the TCR above CCR | High Level | ✅ |
| L-16 | The RM grace period should reset if a BO/liquidation/redistribution makes the TCR below CCR | High Level | ✅ |
| L-17 |Partial Liquidations Cannot Close CDPs | High Level | ✅ |

## Fees

Expand Down
3 changes: 1 addition & 2 deletions packages/contracts/test/CdpManager_SimpleLiquidation_Test.js
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Original file line number Diff line number Diff line change
Expand Up @@ -680,9 +680,8 @@ contract('CdpManager - Simple Liquidation with external liquidators', async acco
const tx = await cdpManager.partiallyLiquidate(_aliceCdpId, _partialAmounts[i], _aliceCdpId, _aliceCdpId, {from: bob})
_partialLiquidationTxs.push(tx);
}else{
// pass 0 or a number bigger than (leftColl*price/LICR) for partialLiquidate equals to full liquidation
let _leftColl = (await cdpManager.getDebtAndCollShares(_aliceCdpId))[1]
const finalTx = await cdpManager.partiallyLiquidate(_aliceCdpId, (_leftColl.add(liqStipend).mul(toBN(_newPrice)).div(LICR)), _aliceCdpId, _aliceCdpId, {from: bob})
const finalTx = await cdpManager.liquidate(_aliceCdpId, {from: bob})
_partialLiquidationTxs.push(finalTx);
}
}
Expand Down
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