Core Module
Handling SAFE state, liquidations and accounting (surplus & bad debt)
Relevant smart contracts:
The Core Module stores all the SAFE data, allows external actors to trigger liquidations in case SAFEs are underwater and also handles debt and surplus auctions.
- The
SAFEEnginestores all SAFEs' states and system coin balances, as well as the amount of collateral and debt each address has. This contract is self-contained and has no external dependencies. - The
LiquidationEngineis meant to check if a SAFE is unsafe (the value of the issued debt is too high compared to the collateral value) and start a collateral auction that sells a portion of the SAFE's collateral in order to cover a share of its debt. - The
AccountingEnginestores the overall system surplus and debt data. It is meant to settle deficit via debt auctions and dispose off surplus via surplus auctions or basic transfers.
SAFEEngine- A bug in theSAFEEnginecould be fatal and would lead to collateral or debt being stuck in the systemLiquidationEngine- A bug in theLiquidationEnginecould lead debt or collateral being assigned to addresses from where they cannot be recovered. Compared to MCD, theLiquidationEnginecan call external contracts that are meant to save SAFEs by adding more collateral in the system. These "insurance" contracts, if coded incorrectly, can change system state without actually adding any collateral and thus block the engine from starting new auctions. TheliquidateSAFE(bytes32 collateralType, address cdp)function also uses mutexes to prevent re-entrancy. If a mutex is not unassigned at the end of the call, it can prevent theLiquidationEnginefrom liquidating a specific SAFE in the future.AccountingEngine- A bug in theAccountingEnginewould prevent the system from reaching equilibrium (by auctioning debt or disposing off surplus).
Both the
SAFEEngine and the LiquidationEngine rely (directly or indirectly) on the OracleRelayer which in turn receives price data from multiple trusted sources. If the price feed oracles fail, it's possible that SAFEs will be unfairly liquidated or that users will generate unbacked debt.SAFEEngine- Malicious governance can steal collateral (modifyCollateralBalance) or mint unbacked debt for no apparent reason (createUnbackedDebt/addition of worthless collateral types).LiquidationEngine- Governance could misconfigure liquidation parameters (e.g an extremely low or highliquidationPenalty).AccountingEngine- Malicious governance can set null addresses as thedebtAuctionHouseor thesurplusAuctionHouseand thus not allow the system to reach equilibrium or even trigger settlement. The can also set a faultyAccountingEngine.systemStakingPoolwhich can prevent the engine from starting new debt auctions and thus leave deficit in the system
SAFEEngine(Level 2 Gov Minimization) - theSAFEEnginewill need an external contract to automatically set theglobalDebtCeilingand each collateral's individualdebtCeilings. Apart from this, governance can remove control from theSAFEEngine.LiquidationEngine(Level 1 Gov Minimization) - theLiquidationEnginemay have an external contract authorized to periodically setonAuctionSystemCoinLimitdepending on the current outstanding amount of system coins generated. Governance will also need to have control over connecting and disconnecting saviour contracts because they are external dependencies connected to other protocols/3rd parties. Apart from these, governance can remove control over this contract.AccountingEngine(Level 2 Gov Minimization) - theAccountingEnginemust authorize an external contract to automatically setinitialDebtAuctionMintedTokensanddebtAuctionBidSizeaccording to the protocol token and system coin market prices. Governance may also keep control over settingsystemStakingPoolin case the staking pool still needs to be upgraded and may cause problems in the engine.