Summary

Vulnerability Details

The protocol incorrectly applies the liquidation threshold to debt instead of collateral when validating borrow requests. This inversion allows users to borrow amounts that exceed their collateral value, creating instant undercollateralized positions and systemic insolvency risk.

here we can also see that it is enforced that the liquidationthreshold is below 10000

proof of concept

uint256 collateralValue = 80e18; // $80 collateral

uint256 liquidationThreshold = 8000; // 80% in basis points (8000 = 80%)

uint256 userTotalDebt = 100e18; //$100 debt

if (collateralValue < userTotalDebt.percentMul(liquidationThreshold)) {
revert NotEnoughCollateralToBorrow()
What It Does (Example Breakdown):

Flawed Calculation:

userTotalDebt.percentMul(liquidationThreshold) = 100e18 * 8000 / 10000 = 80e18 ($80)

if (80e18 < 80e18) → false → borrow allowed

Impact

User borrows

incorrect validation causes borrowers to borrow at a very low collateral amount leading to loss of funds for the protocol

Tools Used

Recommendations

apply the liquidation threshold correctly