PatrickAlphaC
commented
1 year ago If the protocol ever becomes insolvent, there is almost no way to recover. This is a known issue.
This finding as you have written up was what I meant by this.
An auction would 100% be the route of choice here.
We would not be able to incentivize the liquidators.
Severity
Medium Risk
Relevant GitHub Links
https://github.com/Cyfrin/2023-07-foundry-defi-stablecoin/blob/main/src/DSCEngine.sol#L251
Summary - Vulnerability Details
This is the known bug we learned in the tutorial but because it was not mentioned in the
know issuesdue to that I am mentioning it.The protocol gives a
10%bonus to liquidators when they pay the users' borrowed DSC back to the protocol in order to gain their collateral. It means we are paying them$110in collateral tokens for$100DSC tokens.It means if the collateral tokens value will be less than
$110then the protocol will not be able to incentivize the liquidators.It is also possible that the contract will have the collective amount for that token to pay the
10%but this will damage the last users who redeem their collateral for that token but the contract will not have that because it pays incentives.Tools Used
Tutorial
Recommendations
Give the bonus only when the collateral amount is greater than
110%, this way obviously liquidators will not gain any profit for doing liquidation but project owners can save the protocol when the collateral will be less than110%.