Submitted by 0xjuan
As stated in the Revert Lend Whitepaper, the liquidation fee for underwater positions is supposed to be 10% of the debt. However, the code within V3Vault::_calculateLiquidation (shown below) calculates the liquidation fee as 10% of the fullValue rather than 10% of the debt.
The code snippet is here.
As the fullValue decreases below debt (since the position is underwater), liquidators are less-and-less incentivised to liquidate the position. This is because as fullValue decreases, the liquidation fee (10% of fullValue) also decreases.
This goes against the protocols intention (stated in the whitepaper) that the liquidation fee will be fixed at 10% of the debt for underwater positions, breaking core protocol functionality.
Code snippet from V3Vault._calculateLiquidation.
Ensure that the liquidation fee is equal to 10% of the debt. Make the following changes in V3Vault::_calculateLiquidation():
Error
kalinbas (Revert) confirmed, but disagreed with severity and commented:
ronnyx2017 (judge) decreased severity to Medium and commented:
Revert mitigated:
Status: Mitigation Confirmed. Full details in reports from thank_you, b0g0 and ktg.
