feat: add param SmallLiquidationSize (#723) (#728)

(cherry picked from commit d9903f7)

Co-authored-by: Adam Moser <63419657+toteki@users.noreply.github.com>

CHANGELOG.md

@@ -48,6 +48,7 @@ Ref: https://keepachangelog.com/en/1.0.0/
 
 ### Improvements
 
+- [723](https://github.com/umee-network/umee/pull/723) Add leverage parameter SmallLiquidationSize, which determines the USD value at which a borrow is considered small enough to be liquidated in a single transaction.
 - [711](https://github.com/umee-network/umee/pull/711) Clarify error message for negative elapsed time case.
 
 ## [v2.0.0](https://github.com/umee-network/umee/releases/tag/v2.0.0) - 2022-03-25

proto/umee/leverage/v1beta1/leverage.proto

@@ -29,6 +29,13 @@ message Params {
     (gogoproto.nullable)   = false,
     (gogoproto.moretags)   = "yaml:\"oracle_reward_factor\""
   ];
+  // The small_liquidation_size determines the USD value at which a borrow is considered small
+  // enough to be liquidated in a single transaction, bypassing dynamic close factor.
+  string small_liquidation_size = 5 [
+    (gogoproto.customtype) = "github.com/cosmos/cosmos-sdk/types.Dec",
+    (gogoproto.nullable)   = false,
+    (gogoproto.moretags)   = "yaml:\"small_liquidation_size\""
+  ];
 }
 
 // Token defines a token, along with its capital metadata, in the Umee capital

x/leverage/keeper/keeper.go

@@ -585,6 +585,13 @@ func (k Keeper) LiquidationParams(
 	}
 
 	params := k.GetParams(ctx)
+
+	// special case: If borrowed value is less than small liquidation size,
+	// close factor is always 1
+	if borrowed.LTE(params.SmallLiquidationSize) {
+		return liquidationIncentive, sdk.OneDec(), nil
+	}
+
 	// special case: If complete liquidation threshold is zero, close factor is always 1
 	if params.CompleteLiquidationThreshold.IsZero() {
 		return liquidationIncentive, sdk.OneDec(), nil

x/leverage/simulation/genesis.go

@@ -15,6 +15,7 @@ const (
 	completeLiquidationThresholdKey = "complete_liquidation_threshold"
 	minimumCloseFactorKey           = "minimum_close_factor"
 	oracleRewardFactorKey           = "oracle_reward_factor"
+	smallLiquidationSizeKey         = "small_liquidation_size"
 )
 
 // GenCompleteLiquidationThreshold produces a randomized CompleteLiquidationThreshold in the range of [0.050, 0.100]
@@ -32,6 +33,11 @@ func GenOracleRewardFactor(r *rand.Rand) sdk.Dec {
 	return sdk.NewDecWithPrec(005, 3).Add(sdk.NewDecWithPrec(int64(r.Intn(995)), 3))
 }
 
+// GenSmallLiquidationSize produces a randomized SmallLiquidationSize in the range of [0, 1000]
+func GenSmallLiquidationSize(r *rand.Rand) sdk.Dec {
+	return sdk.NewDec(int64(r.Intn(1000)))
+}
+
 // RandomizedGenState generates a random GenesisState for oracle
 func RandomizedGenState(simState *module.SimulationState) {
 	var completeLiquidationThreshold sdk.Dec
@@ -52,11 +58,18 @@ func RandomizedGenState(simState *module.SimulationState) {
 		func(r *rand.Rand) { oracleRewardFactor = GenOracleRewardFactor(r) },
 	)
 
+	var smallLiquidationSize sdk.Dec
+	simState.AppParams.GetOrGenerate(
+		simState.Cdc, smallLiquidationSizeKey, &smallLiquidationSize, simState.Rand,
+		func(r *rand.Rand) { smallLiquidationSize = GenSmallLiquidationSize(r) },
+	)
+
 	leverageGenesis := types.NewGenesisState(
 		types.Params{
 			CompleteLiquidationThreshold: completeLiquidationThreshold,
 			MinimumCloseFactor:           minimumCloseFactor,
 			OracleRewardFactor:           oracleRewardFactor,
+			SmallLiquidationSize:         smallLiquidationSize,
 		},
 		[]types.Token{},
 		[]types.AdjustedBorrow{},

x/leverage/simulation/params.go

@@ -29,5 +29,10 @@ func ParamChanges(r *rand.Rand) []simtypes.ParamChange {
 				return fmt.Sprintf("\"%s\"", GenOracleRewardFactor(r))
 			},
 		),
+		simulation.NewSimParamChange(types.ModuleName, string(types.KeySmallLiquidationSize),
+			func(r *rand.Rand) string {
+				return fmt.Sprintf("\"%s\"", GenSmallLiquidationSize(r))
+			},
+		),
 	}
 }

x/leverage/spec/07_params.md

@@ -7,19 +7,25 @@ The leverage module contains the following parameters:
 | CompleteLiquidationThreshold | sdk.Dec | 0.1     |
 | MinimumCloseFactor           | sdk.Dec | 0.01    |
 | OracleRewardFactor           | sdk.Dec | 0.01    |
+| SmallLiquidationSize         | sdk.Dec | 100.00  |
 
 ## CompleteLiquidationThreshold
 
-CompleteLiquidationThreshold governs how far above their borrow limit a borrower
+CompleteLiquidationThreshold governs how far above their liquidation limit a borrower
 must be to have a [Close Factor](01_concepts.md#Close-Factor) of 1.0 - that is,
 to be eligible for full liquidation in a single liquidation event.
 
 ## MinimumCloseFactor
 
 MinimumCloseFactor is the [Close Factor](01_concepts.md#Close-Factor) for
-borrows that are just above their borrow limit.
+borrows that are just above their liquidation limit.
 
 ## OracleRewardFactor
 
 OracleRewardFactor is the portion of borrow interest accrued that goes to fund
-the `x/oracle` reward pool.
+the `x/oracle` reward pool.
+
+## SmallLiquidationSize
+
+SmallLiquidationSize is the borrow value in USD below which [Close Factor](01_concepts.md#Close-Factor)
+is always 1.

x/leverage/types/params.go

@@ -14,12 +14,14 @@ var (
 	KeyCompleteLiquidationThreshold = []byte("CompleteLiquidationThreshold")
 	KeyMinimumCloseFactor           = []byte("MinimumCloseFactor")
 	KeyOracleRewardFactor           = []byte("OracleRewardFactor")
+	KeySmallLiquidationSize         = []byte("SmallLiquidationSize")
 )
 
 var (
 	defaultCompleteLiquidationThreshold = sdk.MustNewDecFromStr("0.1")
 	defaultMinimumCloseFactor           = sdk.MustNewDecFromStr("0.01")
 	defaultOracleRewardFactor           = sdk.MustNewDecFromStr("0.01")
+	defaultSmallLiquidationSize         = sdk.MustNewDecFromStr("100.00")
 )
 
 func NewParams() Params {
@@ -45,6 +47,11 @@ func (p *Params) ParamSetPairs() paramtypes.ParamSetPairs {
 			&p.OracleRewardFactor,
 			validateOracleRewardFactor,
 		),
+		paramtypes.NewParamSetPair(
+			KeySmallLiquidationSize,
+			&p.SmallLiquidationSize,
+			validateSmallLiquidationSize,
+		),
 	}
 }
 
@@ -66,6 +73,7 @@ func DefaultParams() Params {
 		CompleteLiquidationThreshold: defaultCompleteLiquidationThreshold,
 		MinimumCloseFactor:           defaultMinimumCloseFactor,
 		OracleRewardFactor:           defaultOracleRewardFactor,
+		SmallLiquidationSize:         defaultSmallLiquidationSize,
 	}
 }
 
@@ -80,6 +88,9 @@ func (p Params) Validate() error {
 	if err := validateOracleRewardFactor(p.OracleRewardFactor); err != nil {
 		return err
 	}
+	if err := validateSmallLiquidationSize(p.SmallLiquidationSize); err != nil {
+		return err
+	}
 	return nil
 }
 
@@ -127,3 +138,16 @@ func validateOracleRewardFactor(i interface{}) error {
 
 	return nil
 }
+
+func validateSmallLiquidationSize(i interface{}) error {
+	v, ok := i.(sdk.Dec)
+	if !ok {
+		return fmt.Errorf("invalid parameter type: %T", i)
+	}
+
+	if v.IsNegative() {
+		return fmt.Errorf("small liquidation size cannot be negative: %d", v)
+	}
+
+	return nil
+}