Collateral type removed from cachedCollateralLiquidationPriority can't be liquidated
Summary
If a collateral is removed from the cachedCollateralLiquidationPriority, and a trading account has this as a collateral, during liquidation, this collateral will not be taken into consideration.
Vulnerability Details
As stated above, if a collateral is removed from the set cachedCollateralLiquidationPriority, the protocol will not be able to fully liquidate the user's positions. This occurs because the collateral, although deposited by the user, is effectively ignored during the liquidation process. As a result, the liquidation mechanism fails to account for the total value of the collateral available in the trading account.
POC
The current list of
cachedCollateralLiquidationPrioritycontains USDC and WETH.User position which is liquidatable is backed by USDC, DAI and USDT
During liquidation, it will liquidate just the USDC.
Impact
The protocol will lose funds due to the incomplete liquidation of the user's trading account. And the collateral will be stucked in the protocol.
Tools Used
Manual review
Recommendations
Consider implementing mechanism which will take in consideration all of the collateral deposited as margin by the trading account, not just the set of cachedCollateralLiquidationPriority
Lead Judging Commences
removal of collateral types from the liquidation priority list will affect affect the liquidation process of the existing positions
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