No bad debt handling
Summary
No bad debt handling in the protocol.
Vulnerability Details
In case if collateral has dropped in price, then it's possible that minted amount of vault costs more than total collaterall inside it. This is called a bad debt. In this case protocol will just sell all collateral to get EURO tokens adn what is expected that burnEuros will be smaller than minted of the vault. As result, smaller amount will be burnt.
As result we have more token in cicrulation that are not backed by any collateral.
Impact
Increase of not backed EURO tokens, drop of EURO price.
Tools Used
VsCode
Recommendations
As TST stakers receives fees from vault owners, maybe you can create mechanism that makes them take a loss in case of bad debt.
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