Foundry DeFi Stablecoin CodeHawks Audit Contest

Summary

The projects stability mechanisms are fixed

Vulnerability Details

The parameters for health and liquidation are fixed
They cant be updated via setter functions, governance, algorithmically or otherwise
Once set in stone they cant be adopted to existing dynamics to better control protocol and safeguard peg
This puts the protocol at security, risk management, depeg risks as conditions may not be ideal for these values and these values can't be changed

Impact

Medium: The project is inflexible and brittle as cant adjust parameters according to dynamics
A big problem is the fixed incentive bonus 10% cant be changed if other protocols all have parameters above 10% this protocol will not be competitive as liquidators will rush to the most lucrative protocols, putting the stabilization effects of liquidation at risk as project cant attract liquidators.Setter functions would be helpful

Some protocols incentivize liquidation by ensuring that the worser the health score the greater the bonus

Tools Used

Manual Analysis

Recommendations

It is recommended that these critical parameters health score, stability fee be adoptable, able to be set, able to be changed, able to be flexible and changed e.g governance controlled setter functions for health, bonus etc, upgradeable contracts or such other relevant mechanism. algorithmic mechanisms can also be employed to change these parameters if want to ensure no centralization risks by introducing setter functions, upgrades or governance