Core Contracts

Summary

The system uses 2 different thresholds to determine if a user is healthy.

Vulnerability Details

The system defines liquidatabale in 2 different ways:

• 1️⃣ If a user's collateral is worth less than 80% of their debt. (80% == BASE_LIQUIDATION_THRESHOLD == liquidationThreshold, by default is set to 80%)

• 2️⃣ If a user's health factors is less than 1e18. (BASE_HEALTH_FACTOR_LIQUIDATION_THRESHOLD == 1e18, by default even though can be changed)

These 2 are different because the way the health factor is calculated has nothing to due with the collateral value being worth less than 80% of the debt.

Let's see how the heath factor is calculated here:

Now in borrow() we see that the check to avoid users becoming instantly liquidatable is done like so:

Numerical Example

These are different checks providing different results:

• Debt value: 100.

• Collateral value: 110.

• 1️⃣ 80% of the debt is 80. The collateral is worth more than 80% of the debt -> Not liquidatable.

• 2️⃣ The health factor is 0.8*110 / 100 = 0.88. The health factor is less than 1 -> Liquidatable.

Impact

Some users will be liquidatable according to the logic in some functions and not liquditable according to the logic in other functions.

Recommendations

Choose one and stick to it. I would recommend the one in calculateHealthFactor() as it is a more conservative approach to avoid bad debt.