fix(perp): Block users from opening infinite leverage positions (#776)

* feat: Add check of margin ratio when opening a new position * fix: Update changelog * fix: Fix changelog * fix: Remove redundent bad debt test in liquidate_test Co-authored-by: matthiasmatt <[email protected]>
NibiruChain · Aug 3, 2022 · 8c6e971 · 8c6e971
1 parent b238df7
commit 8c6e971
Show file tree

Hide file tree

Showing 7 changed files with 35 additions and 48 deletions.
diff --git a/CHANGELOG.md b/CHANGELOG.md
@@ -51,6 +51,7 @@ and this project adheres to [Semantic Versioning](https://semver.org/spec/v2.0.0
 ### Bug Fixes
 
 * [#766](https://github.com/NibiruChain/nibiru/pull/766) Fixed margin ratio calculation for trader position.
+* [#776](https://github.com/NibiruChain/nibiru/pull/776) - Fix a bug where the user could open infinite leverage positions
 
 ## [v0.11.0](https://github.com/NibiruChain/nibiru/releases/tag/v0.11.0) - 2022-07-29
 

diff --git a/x/perp/keeper/clearing_house.go b/x/perp/keeper/clearing_house.go
@@ -129,7 +129,7 @@ func (k Keeper) afterPositionUpdate(
 		return fmt.Errorf("bad debt must be zero to prevent attacker from leveraging it")
 	}
 
-	if !isNewPosition && !positionResp.Position.Size_.IsZero() {
+	if !positionResp.Position.Size_.IsZero() {
 		marginRatio, err := k.GetMarginRatio(
 			ctx,
 			*positionResp.Position,
@@ -141,7 +141,7 @@ func (k Keeper) afterPositionUpdate(
 
 		maintenanceMarginRatio := k.VpoolKeeper.GetMaintenanceMarginRatio(ctx, pair)
 		if err = requireMoreMarginRatio(marginRatio, maintenanceMarginRatio, true); err != nil {
-			return err
+			return types.ErrMarginRatioTooLow
 		}
 	}
 

diff --git a/x/perp/keeper/clearing_house_integration_test.go b/x/perp/keeper/clearing_house_integration_test.go
@@ -1,7 +1,6 @@
 package keeper_test
 
 import (
-	"fmt"
 	"testing"
 	"time"
 
@@ -357,7 +356,7 @@ func TestOpenPositionError(t *testing.T) {
 			margin:      sdk.NewInt(1),
 			leverage:    sdk.OneDec(),
 			baseLimit:   sdk.ZeroDec(),
-			expectedErr: fmt.Errorf("margin ratio did not meet criteria"),
+			expectedErr: types.ErrMarginRatioTooLow,
 		},
 		{
 			name:            "new long position not over base limit",
@@ -399,6 +398,26 @@ func TestOpenPositionError(t *testing.T) {
 			baseLimit:       sdk.NewDec(10_000),
 			expectedErr:     types.ErrLeverageIsZero,
 		},
+		{
+			name:            "leverage amount is too high - SELL",
+			traderFunds:     sdk.NewCoins(sdk.NewInt64Coin(common.DenomStable, 1020)),
+			initialPosition: nil,
+			side:            types.Side_SELL,
+			margin:          sdk.NewInt(100),
+			leverage:        sdk.NewDec(100),
+			baseLimit:       sdk.NewDec(11_000),
+			expectedErr:     types.ErrMarginRatioTooLow,
+		},
+		{
+			name:            "leverage amount is too high - BUY",
+			traderFunds:     sdk.NewCoins(sdk.NewInt64Coin(common.DenomStable, 1020)),
+			initialPosition: nil,
+			side:            types.Side_BUY,
+			margin:          sdk.NewInt(100),
+			leverage:        sdk.NewDec(100),
+			baseLimit:       sdk.NewDec(0),
+			expectedErr:     types.ErrMarginRatioTooLow,
+		},
 		{
 			name:            "new long position over fluctuation limit",
 			traderFunds:     sdk.NewCoins(sdk.NewInt64Coin(common.DenomStable, 1_000_000_000_000)),

diff --git a/x/perp/keeper/liquidate_test.go b/x/perp/keeper/liquidate_test.go
@@ -31,7 +31,6 @@ func TestExecuteFullLiquidation(t *testing.T) {
 		traderFunds               sdk.Coin
 		expectedLiquidatorBalance sdk.Coin
 		expectedPerpEFBalance     sdk.Coin
-		expectedBadDebt           sdk.Dec
 	}
 
 	testCases := map[string]test{
@@ -52,7 +51,6 @@ func TestExecuteFullLiquidation(t *testing.T) {
 			// startingBalance = 1_000_000
 			// perpEFBalance = startingBalance + openPositionDelta + liquidateDelta
 			expectedPerpEFBalance: sdk.NewInt64Coin("NUSD", 1_047_550),
-			expectedBadDebt:       sdk.MustNewDecFromStr("0"),
 		},
 		"happy path - Sell": {
 			positionSide: types.Side_SELL,
@@ -71,45 +69,6 @@ func TestExecuteFullLiquidation(t *testing.T) {
 			// startingBalance = 1_000_000
 			// perpEFBalance = startingBalance + openPositionDelta + liquidateDelta
 			expectedPerpEFBalance: sdk.NewInt64Coin("NUSD", 1_046_972),
-			expectedBadDebt:       sdk.MustNewDecFromStr("0"),
-		},
-		"happy path - bad debt, long": {
-			/* We open a position for 500k, with a liquidation fee of 50k.
-			This means 25k for the liquidator, and 25k for the perp fund.
-			Because the user only have margin for 50, we create 24950 of bad
-			debt (25000 due to liquidator minus 50).
-			*/
-			positionSide:   types.Side_BUY,
-			quoteAmount:    sdk.NewInt(50),
-			leverage:       sdk.MustNewDecFromStr("10000"),
-			baseAssetLimit: sdk.ZeroDec(),
-			liquidationFee: sdk.MustNewDecFromStr("0.1"),
-			traderFunds:    sdk.NewInt64Coin("NUSD", 1150),
-			// feeToLiquidator
-			//   = positionResp.ExchangedNotionalValue * liquidationFee / 2
-			//   = 500_000 * 0.1 / 2 = 25_000
-			expectedLiquidatorBalance: sdk.NewInt64Coin("NUSD", 25_000),
-			// startingBalance = 1_000_000
-			// perpEFBalance = startingBalance + openPositionDelta + liquidateDelta
-			expectedPerpEFBalance: sdk.NewInt64Coin("NUSD", 975_550),
-			expectedBadDebt:       sdk.MustNewDecFromStr("24950"),
-		},
-		"happy path - bad debt, short": {
-			// Same as above case but for shorts
-			positionSide:   types.Side_SELL,
-			quoteAmount:    sdk.NewInt(50),
-			leverage:       sdk.MustNewDecFromStr("10000"),
-			baseAssetLimit: sdk.ZeroDec(),
-			liquidationFee: sdk.MustNewDecFromStr("0.1"),
-			traderFunds:    sdk.NewInt64Coin("NUSD", 1150),
-			// feeToLiquidator
-			//   = positionResp.ExchangedNotionalValue * liquidationFee / 2
-			//   = 500_000 * 0.1 / 2 = 25_000
-			expectedLiquidatorBalance: sdk.NewInt64Coin("NUSD", 25_000),
-			// startingBalance = 1_000_000
-			// perpEFBalance = startingBalance + openPositionDelta + liquidateDelta
-			expectedPerpEFBalance: sdk.NewInt64Coin("NUSD", 975_550),
-			expectedBadDebt:       sdk.MustNewDecFromStr("24950"),
 		},
 	}
 
@@ -156,6 +115,10 @@ func TestExecuteFullLiquidation(t *testing.T) {
 				sdk.NewCoins(tc.traderFunds))
 			require.NoError(t, err)
 
+			t.Log("increment block height and time for TWAP calculation")
+			ctx = ctx.WithBlockHeight(ctx.BlockHeight() + 1).
+				WithBlockTime(time.Now().Add(time.Minute))
+
 			t.Log("Open position")
 			positionResp, err := nibiruApp.PerpKeeper.OpenPosition(
 				ctx, tokenPair, tc.positionSide, traderAddr, tc.quoteAmount, tc.leverage, tc.baseAssetLimit)
@@ -232,7 +195,6 @@ func TestExecutePartialLiquidation(t *testing.T) {
 
 		expectedLiquidatorBalance sdk.Coin
 		expectedPerpEFBalance     sdk.Coin
-		expectedBadDebt           sdk.Dec
 		expectedPositionSize      sdk.Dec
 		expectedMarginRemaining   sdk.Dec
 	}{
@@ -257,7 +219,6 @@ func TestExecutePartialLiquidation(t *testing.T) {
 			// startingBalance = 1_000_000
 			// perpEFBalance = startingBalance + openPositionDelta + liquidateDelta
 			expectedPerpEFBalance: sdk.NewInt64Coin("yyy", 1_001_050),
-			expectedBadDebt:       sdk.MustNewDecFromStr("0"),
 		},
 		{
 			name:           "happy path - Sell",
@@ -282,7 +243,6 @@ func TestExecutePartialLiquidation(t *testing.T) {
 			// startingBalance = 1_000_000
 			// perpEFBalance = startingBalance + openPositionDelta + liquidateDelta
 			expectedPerpEFBalance: sdk.NewInt64Coin("yyy", 1_001_050),
-			expectedBadDebt:       sdk.MustNewDecFromStr("0"),
 		},
 	}
 

diff --git a/x/perp/keeper/msg_server_test.go b/x/perp/keeper/msg_server_test.go
@@ -288,6 +288,10 @@ func TestMsgServerOpenPosition(t *testing.T) {
 				require.NoError(t, simapp.FundAccount(app.BankKeeper, ctx, traderAddr, tc.traderFunds))
 			}
 
+			t.Log("increment block height and time for TWAP calculation")
+			ctx = ctx.WithBlockHeight(ctx.BlockHeight() + 1).
+				WithBlockTime(time.Now().Add(time.Minute))
+
 			resp, err := msgServer.OpenPosition(sdk.WrapSDKContext(ctx), &types.MsgOpenPosition{
 				Sender:               tc.sender,
 				TokenPair:            tc.pair,

diff --git a/x/perp/keeper/perp_test.go b/x/perp/keeper/perp_test.go
@@ -176,6 +176,7 @@ func TestKeeperClosePosition(t *testing.T) {
 		)
 
 		t.Log("open position for alice - long")
+		ctx = ctx.WithBlockHeight(ctx.BlockHeight() + 1).WithBlockTime(time.Now().Add(time.Minute))
 
 		alice := sample.AccAddress()
 		err := simapp.FundAccount(nibiruApp.BankKeeper, ctx, alice,
@@ -206,6 +207,7 @@ func TestKeeperClosePosition(t *testing.T) {
 		bobQuote := sdk.NewInt(60)
 		bobLeverage := sdk.NewDec(10)
 		bobBaseLimit := sdk.NewDec(150)
+
 		_, err = nibiruApp.PerpKeeper.OpenPosition(
 			ctx, pair, bobSide, bob, bobQuote, bobLeverage, bobBaseLimit)
 		require.NoError(t, err)

diff --git a/x/perp/types/types.go b/x/perp/types/types.go
@@ -26,6 +26,7 @@ var (
 	ErrFailedRemoveMarginCanCauseBadDebt = sdkerrors.Register(ModuleName, 7, "failed to remove margin; position would have bad debt if removed")
 	ErrQuoteAmountIsZero                 = sdkerrors.Register(ModuleName, 8, "quote amount cannot be zero")
 	ErrLeverageIsZero                    = sdkerrors.Register(ModuleName, 9, "leverage cannot be zero")
+	ErrMarginRatioTooLow                 = sdkerrors.Register(ModuleName, 10, "margin ratio did not meet maintenance margin ratio")
 )
 
 func ZeroPosition(ctx sdk.Context, tokenPair common.AssetPair, traderAddr sdk.AccAddress) *Position {