Submitted by leastwood
As sNOTE have governance voting rights equivalent to the token amount in NOTE, users who stake their NOTE are also able to vote on governance proposals. In the event a majority of NOTE is staked in the sNOTE contract, it doesnt seem likely that stakers would be willing to vote on a proposal which liquidates a portion of their staked position.
Hence, the protocol may be put into a state where stakers are unwilling to vote on a proposal to call extractTokensForCollateralShortfall, leaving Notional insolvent as stakers continue to dump their holdings.
https://github.com/code-423n4/2022-01-notional/blob/main/contracts/sNOTE.sol#L99-L129
Consider redesigning this mechanism to better align stakers with the health of the protocol. It might be useful to allocate a percentage of generated fees to an insurance fund which will be used to cover any collateral shortfall events. This fund can be staked to generate additional yield.
jeffywu (Notional) acknowledged and commented:
pauliax (judge) commented:
