Submitted by EV_om, also found by Ward
The AuctionHouse contract implements a Dutch auction mechanism to recover debt from collateral. However, there is no check for sequencer uptime, which could lead to auctions failing or executing at unfavorable prices.
The current deployment parameters allow auctions to succeed without a loss to the protocol for a duration of 10m 50s. If theres no bid on the auction after this period, the protocol has no other option but to take a loss or forgive the loan. This could have serious consequences in the event of a network outage, as any loss results in the slashing of all users with weight on the term.
Network outages and large reorgs happen with relative frequency. For instance, Arbitrum suffered an hour-long outage just two weeks ago (source).
Consider the following scenario:
To mitigate this issue, consider integrating an external uptime feed such as Chainlinks L2 Sequencer Feeds. This would allow the contract to invalidate an auction if the sequencer was ever offline during its duration. Alternatively, implement a mechanism to restart an auction if it has received no bids.
eswak (Ethereum Credit Guild) acknowledged, but disagreed with severity and commented:
TrungOre (judge) commented:
