feat: add borrow factor

CHANGELOG.md

@@ -48,6 +48,7 @@ Ref: https://keepachangelog.com/en/1.0.0/
 
 ### Features
 
+- [2114](https://github.com/umee-network/umee/pull/2114) Add borrow factor to `x/leverage`
 - [2102](https://github.com/umee-network/umee/pull/2102) and [2106](https://github.com/umee-network/umee/pull/2106) Add `MsgLeveragedLiquidate` to `x/leverage`
 - [2085](https://github.com/umee-network/umee/pull/2085) Add `inspect` query to leverage module, which msut be enabled on a node by running with `-l` liquidator query flag.
 - [1952](https://github.com/umee-network/umee/pull/1952) Add `x/incentive` module.

x/leverage/README.md

@@ -20,6 +20,7 @@ The leverage module depends directly on `x/oracle` for asset prices, and interac
      - [uToken Exchange Rate](#utoken-exchange-rate)
      - [Supply Utilization](#supply-utilization)
      - [Borrow Limit](#borrow-limit)
+     - [Borrow Factor](#borrow-factor)
      - [Liquidation Threshold](#liquidation-threshold)
      - [Borrow APY](#borrow-apy)
      - [Supplying APY](#supplying-apy)
@@ -168,6 +169,21 @@ A user's borrow limit is the sum of the contributions from each denomination of
 
 For tokens with hith historic prices enabled (indicated by a `HistoricMedians` parameter greater than zero), each collateral `TokenValue` is computed with `PriceModeLow`, i.e. the lower of either spot price or historic price is used.
 
+#### Borrow Factor
+
+Each token in the `Token Registry` has a parameter called `CollateralWeight`, always less than 1, which determines the portion of the token's value that goes towards a user's borrow limit, when the token is used as collateral.
+
+An implied parameter `BorrowFactor` is derived from `CollateralWeight` - specifically, it is the minimum of `2.0` and `1/CollateralWeight`.
+The maximum borrow factor of `2.0` allows risky or non-collateral assets (`0 <= CollateralWeight < 0.5`) to be borrowed to a certain minimum degree.
+
+When a user is borrowing, their borrow limit is whichever is more restrictive of the following two rules:
+
+- Borrowed value must be less than collateral value times `CollateralWeight` (sum over each collateral asset)
+- Borrowed value times `BorrowFactor` (sum over each borrowed asset) must be less than collateral value.
+
+This means that when the original borrow limit based on collateral weight would allow a higher quality collateral to borrow a risky asset with a small margin of safety, the user's effective collateral weight is reduced to that of the riskier asset.
+(Or `0.5` at the minimum.)
+
 #### Historic Borrow Limit, Value
 
 The leverage module also makes use of the oracle's historic prices to enforce an additional restriction on borrowing.

x/leverage/keeper/borrows.go

@@ -8,7 +8,8 @@ import (
 )
 
 // assertBorrowerHealth returns an error if a borrower is currently above their borrow limit,
-// under either recent (historic median) or current prices. It returns an error if
+// under either recent (historic median) or current prices. Checks using borrow limit based
+// on collateral weight, then check separately for borrow limit using borrow factor. Error if
 // borrowed asset prices cannot be calculated, but will try to treat collateral whose prices are
 // unavailable as having zero value. This can still result in a borrow limit being too low,
 // unless the remaining collateral is enough to cover all borrows.
@@ -21,18 +22,34 @@ func (k Keeper) assertBorrowerHealth(ctx sdk.Context, borrowerAddr sdk.AccAddres
 	borrowed := k.GetBorrowerBorrows(ctx, borrowerAddr)
 	collateral := k.GetBorrowerCollateral(ctx, borrowerAddr)
 
-	value, err := k.TotalTokenValue(ctx, borrowed, types.PriceModeHigh)
+	// check health using collateral weight
+	borrowValue, err := k.TotalTokenValue(ctx, borrowed, types.PriceModeHigh)
 	if err != nil {
 		return err
 	}
-	limit, err := k.VisibleBorrowLimit(ctx, collateral)
+	borrowLimit, err := k.VisibleBorrowLimit(ctx, collateral)
 	if err != nil {
 		return err
 	}
-	if value.GT(limit.Mul(maxUsage)) {
+	if borrowValue.GT(borrowLimit.Mul(maxUsage)) {
 		return types.ErrUndercollaterized.Wrapf(
-			"borrowed: %s, limit: %s, max usage %s", value, limit, maxUsage)
+			"borrowed: %s, limit: %s, max usage %s", borrowValue, borrowLimit, maxUsage)
 	}
+
+	// check health using borrow factor
+	weightedBorrowValue, err := k.ValueWithBorrowFactor(ctx, borrowed, types.PriceModeHigh)
+	if err != nil {
+		return err
+	}
+	collateralValue, err := k.VisibleUTokensValue(ctx, collateral, types.PriceModeLow)
+	if err != nil {
+		return err
+	}
+	if weightedBorrowValue.GT(collateralValue.Mul(maxUsage)) {
+		return types.ErrUndercollaterized.Wrapf(
+			"weighted borrow: %s, collateral value: %s, max usage %s", weightedBorrowValue, collateralValue, maxUsage)
+	}
+
 	return nil
 }
 

x/leverage/keeper/collateral.go

@@ -73,9 +73,9 @@ func (k Keeper) GetTotalCollateral(ctx sdk.Context, denom string) sdk.Coin {
 }
 
 // CalculateCollateralValue uses the price oracle to determine the value (in USD) provided by
-// collateral sdk.Coins, using each token's uToken exchange rate. Always uses spot price.
+// collateral sdk.Coins, using each token's uToken exchange rate.
 // An error is returned if any input coins are not uTokens or if value calculation fails.
-func (k Keeper) CalculateCollateralValue(ctx sdk.Context, collateral sdk.Coins) (sdk.Dec, error) {
+func (k Keeper) CalculateCollateralValue(ctx sdk.Context, collateral sdk.Coins, mode types.PriceMode) (sdk.Dec, error) {
 	total := sdk.ZeroDec()
 
 	for _, coin := range collateral {
@@ -86,23 +86,23 @@ func (k Keeper) CalculateCollateralValue(ctx sdk.Context, collateral sdk.Coins)
 		}
 
 		// get USD value of base assets
-		v, err := k.TokenValue(ctx, baseAsset, types.PriceModeSpot)
+		v, err := k.TokenValue(ctx, baseAsset, mode)
 		if err != nil {
 			return sdk.ZeroDec(), err
 		}
 
-		// add each collateral coin's weighted value to borrow limit
+		// add each collateral coin's value to borrow limit
 		total = total.Add(v)
 	}
 
 	return total, nil
 }
 
 // VisibleCollateralValue uses the price oracle to determine the value (in USD) provided by
-// collateral sdk.Coins, using each token's uToken exchange rate. Always uses spot price.
+// collateral sdk.Coins, using each token's uToken exchange rate.
 // Unlike CalculateCollateralValue, this function will not return an error if value calculation
 // fails on a token - instead, that token will contribute zero value to the total.
-func (k Keeper) VisibleCollateralValue(ctx sdk.Context, collateral sdk.Coins) (sdk.Dec, error) {
+func (k Keeper) VisibleCollateralValue(ctx sdk.Context, collateral sdk.Coins, mode types.PriceMode) (sdk.Dec, error) {
 	total := sdk.ZeroDec()
 
 	for _, coin := range collateral {
@@ -113,7 +113,7 @@ func (k Keeper) VisibleCollateralValue(ctx sdk.Context, collateral sdk.Coins) (s
 		}
 
 		// get USD value of base assets
-		v, err := k.TokenValue(ctx, baseAsset, types.PriceModeSpot)
+		v, err := k.TokenValue(ctx, baseAsset, mode)
 		if err == nil {
 			// for coins that did not error, add their value to the total
 			total = total.Add(v)
@@ -169,13 +169,13 @@ func (k *Keeper) VisibleCollateralShare(ctx sdk.Context, denom string) (sdk.Dec,
 	thisCollateral := sdk.NewCoins(sdk.NewCoin(denom, systemCollateral.AmountOf(denom)))
 
 	// get USD collateral value for all uTokens combined, except those experiencing price outages
-	totalValue, err := k.VisibleCollateralValue(ctx, systemCollateral)
+	totalValue, err := k.VisibleCollateralValue(ctx, systemCollateral, types.PriceModeSpot)
 	if err != nil {
 		return sdk.ZeroDec(), err
 	}
 
 	// get USD collateral value for this uToken only
-	thisValue, err := k.CalculateCollateralValue(ctx, thisCollateral)
+	thisValue, err := k.CalculateCollateralValue(ctx, thisCollateral, types.PriceModeSpot)
 	if err != nil {
 		return sdk.ZeroDec(), err
 	}

x/leverage/keeper/grpc_query.go

@@ -228,7 +228,7 @@ func (q Querier) AccountSummary(
 	}
 
 	// collateral value always uses spot prices, and this line skips assets that are missing prices
-	collateralValue, err := q.Keeper.VisibleCollateralValue(ctx, collateral)
+	collateralValue, err := q.Keeper.VisibleCollateralValue(ctx, collateral, types.PriceModeSpot)
 	if err != nil {
 		return nil, err
 	}

x/leverage/keeper/grpc_query_test.go

@@ -25,7 +25,7 @@ func (s *IntegrationTestSuite) TestQuerier_RegisteredTokens() {
 			"valid: get the all registered tokens",
 			"",
 			types.QueryRegisteredTokens{},
-			5,
+			6,
 		},
 		{
 			"valid: get the registered token info by base_denom",

x/leverage/keeper/inspector.go

@@ -68,7 +68,7 @@ func (q Querier) Inspect(
 		borrowed := k.GetBorrowerBorrows(ctx, addr)
 		borrowedValue, _ := k.TotalTokenValue(ctx, borrowed, types.PriceModeSpot)
 		collateral := k.GetBorrowerCollateral(ctx, addr)
-		collateralValue, _ := k.CalculateCollateralValue(ctx, collateral)
+		collateralValue, _ := k.CalculateCollateralValue(ctx, collateral, types.PriceModeSpot)
 		liquidationThreshold, _ := k.CalculateLiquidationThreshold(ctx, collateral)
 
 		account := types.InspectAccount{

x/leverage/keeper/inspector_test.go

@@ -25,13 +25,17 @@ func TestNeat(t *testing.T) {
 		"-12.555":            -12.55,             // truncates default to cent
 		"-0.00123456789":     -0.001234,          // truncates <0.01 to millionth
 		"-0.000000987654321": -0.000000987654321, // <0.000001 gets maximum precision
-		// edge case: >2^64 displays incorrectly
-		// this should be fine, since this is a display-only function (not used in transactions)
-		// which is used on dollar (not token) amounts
-		"123456789123456789123456789.123456789": -9.223372036854776e+21,
 	}
 
 	for s, f := range cases {
 		assert.Equal(f, neat(sdk.MustNewDecFromStr(s)))
 	}
+
+	// edge case: >2^64 displays incorrectly
+	// this should be fine, since this is a display-only function (not used in transactions)
+	// which is used on dollar (not token) amounts
+	assert.NotEqual(
+		123456789123456789123456789.123456789,
+		neat(sdk.MustNewDecFromStr("123456789123456789123456789.123456789")),
+	)
 }

x/leverage/keeper/limits.go

@@ -7,9 +7,9 @@ import (
 )
 
 // userMaxWithdraw calculates the maximum amount of uTokens an account can currently withdraw and the amount of
-// these uTokens is non-collateral. Input denom should be a base token. If oracle prices are missing for some of the
-// borrower's collateral (other than the denom being withdrawn), computes the maximum safe withdraw allowed by only
-// the collateral whose prices are known.
+// these uTokens which are non-collateral. Input denom should be a base token. If oracle prices are missing for
+// some of the borrower's collateral (other than the denom being withdrawn), computes the maximum safe withdraw
+// allowed by only the collateral whose prices are known.
 func (k *Keeper) userMaxWithdraw(ctx sdk.Context, addr sdk.AccAddress, denom string) (sdk.Coin, sdk.Coin, error) {
 	uDenom := types.ToUTokenDenom(denom)
 	availableTokens := sdk.NewCoin(denom, k.AvailableLiquidity(ctx, denom))
@@ -37,6 +37,27 @@ func (k *Keeper) userMaxWithdraw(ctx sdk.Context, addr sdk.AccAddress, denom str
 		return sdk.NewCoin(uDenom, withdrawAmount), sdk.NewCoin(uDenom, walletUtokens), nil
 	}
 
+	// calculate collateral value for the account, using the lower of spot or historic prices for each token
+	// will count collateral with missing prices as zero value without returning an error
+	collateralValue, err := k.VisibleCollateralValue(ctx, totalCollateral, types.PriceModeLow)
+	if err != nil {
+		// for errors besides a missing price, the whole transaction fails
+		return sdk.Coin{}, sdk.Coin{}, err
+	}
+
+	// calculate weighted borrowed value - used by the borrow factor limit
+	weightedBorrowValue, err := k.ValueWithBorrowFactor(ctx, totalBorrowed, types.PriceModeHigh)
+	if nonOracleError(err) {
+		// for errors besides a missing price, the whole transaction fails
+		return sdk.Coin{}, sdk.Coin{}, err
+	}
+	if err != nil {
+		// for missing prices on borrowed assets, we can't withdraw any collateral
+		// but can withdraw non-collateral uTokens
+		withdrawAmount := sdk.MinInt(walletUtokens, availableUTokens.Amount)
+		return sdk.NewCoin(uDenom, withdrawAmount), sdk.NewCoin(uDenom, walletUtokens), nil
+	}
+
 	// if no non-blacklisted tokens are borrowed, withdraw the maximum available amount
 	if borrowedValue.IsZero() {
 		withdrawAmount := walletUtokens.Add(unbondedCollateral.Amount)
@@ -46,15 +67,24 @@ func (k *Keeper) userMaxWithdraw(ctx sdk.Context, addr sdk.AccAddress, denom str
 
 	// compute the borrower's borrow limit using all their collateral
 	// except the denom being withdrawn (also excluding collateral missing oracle prices)
-	otherBorrowLimit, err := k.VisibleBorrowLimit(ctx, otherCollateral)
+	otherCollateralBorrowLimit, err := k.VisibleBorrowLimit(ctx, otherCollateral)
 	if err != nil {
 		return sdk.Coin{}, sdk.Coin{}, err
 	}
 	// if their other collateral fully covers all borrows, withdraw the maximum available amount
-	if borrowedValue.LT(otherBorrowLimit) {
-		withdrawAmount := walletUtokens.Add(unbondedCollateral.Amount)
-		withdrawAmount = sdk.MinInt(withdrawAmount, availableUTokens.Amount)
-		return sdk.NewCoin(uDenom, withdrawAmount), sdk.NewCoin(uDenom, walletUtokens), nil
+	if borrowedValue.LT(otherCollateralBorrowLimit) {
+		// also check collateral value vs weighted borrow (borrow factor limit)
+		otherCollateralValue, err := k.VisibleCollateralValue(ctx, otherCollateral, types.PriceModeLow)
+		if err != nil {
+			return sdk.Coin{}, sdk.Coin{}, err
+		}
+		// if weighted borrow does not exceed other collateral value, this collateral can be fully withdrawn
+		if otherCollateralValue.GTE(weightedBorrowValue) {
+			// in this case, both borrow limits will not be exceeded even if all collateral is withdrawn
+			withdrawAmount := walletUtokens.Add(unbondedCollateral.Amount)
+			withdrawAmount = sdk.MinInt(withdrawAmount, availableUTokens.Amount)
+			return sdk.NewCoin(uDenom, withdrawAmount), sdk.NewCoin(uDenom, walletUtokens), nil
+		}
 	}
 
 	// for nonzero borrows, calculations are based on unused borrow limit
@@ -64,8 +94,8 @@ func (k *Keeper) userMaxWithdraw(ctx sdk.Context, addr sdk.AccAddress, denom str
 	if err != nil {
 		return sdk.Coin{}, sdk.Coin{}, err
 	}
-	// borrowers above their borrow limit cannot withdraw collateral, but can withdraw wallet uTokens
-	if borrowLimit.LTE(borrowedValue) {
+	// borrowers above either of their borrow limits cannot withdraw collateral, but can withdraw wallet uTokens
+	if borrowLimit.LTE(borrowedValue) || collateralValue.LTE(weightedBorrowValue) {
 		withdrawAmount := sdk.MinInt(walletUtokens, availableUTokens.Amount)
 		return sdk.NewCoin(uDenom, withdrawAmount), sdk.NewCoin(uDenom, walletUtokens), nil
 	}
@@ -81,8 +111,19 @@ func (k *Keeper) userMaxWithdraw(ctx sdk.Context, addr sdk.AccAddress, denom str
 		return sdk.Coin{}, sdk.Coin{}, err
 	}
 
-	// if only a portion of collateral is unused, withdraw only that portion
+	// if only a portion of collateral is unused, withdraw only that portion (regular borrow limit)
 	unusedCollateralFraction := unusedBorrowLimit.Quo(specificBorrowLimit)
+
+	// calculate value of this collateral specifically, which is used in borrow factor's borrow limit
+	specificCollateralValue, err := k.CalculateCollateralValue(ctx, sdk.NewCoins(thisCollateral), types.PriceModeLow)
+	if err != nil {
+		return sdk.Coin{}, sdk.Coin{}, err
+	}
+	unusedCollateralValue := collateralValue.Sub(weightedBorrowValue)
+	// Find the more restrictive of either borrow factor limit or borrow limit
+	unusedCollateralFraction = sdk.MinDec(unusedCollateralFraction, unusedCollateralValue.Quo(specificCollateralValue))
+
+	// Both borrow limits are satisfied by this withdrawal amount. The restrictions below relate to neither.
 	unusedCollateral := unusedCollateralFraction.MulInt(thisCollateral.Amount).TruncateInt()
 
 	// find the minimum of unused collateral (due to borrows) or unbonded collateral (incentive module)
@@ -101,11 +142,16 @@ func (k *Keeper) userMaxWithdraw(ctx sdk.Context, addr sdk.AccAddress, denom str
 
 // userMaxBorrow calculates the maximum amount of a given token an account can currently borrow.
 // input denom should be a base token. If oracle prices are missing for some of the borrower's
-// collateral, computes the maximum safe borrow allowed by only the collateral whose prices are known
+// collateral, computes the maximum safe borrow allowed by only the collateral whose prices are known.
 func (k *Keeper) userMaxBorrow(ctx sdk.Context, addr sdk.AccAddress, denom string) (sdk.Coin, error) {
 	if types.HasUTokenPrefix(denom) {
 		return sdk.Coin{}, types.ErrUToken
 	}
+	token, err := k.GetTokenSettings(ctx, denom)
+	if err != nil {
+		return sdk.Coin{}, err
+	}
+
 	availableTokens := k.AvailableLiquidity(ctx, denom)
 
 	totalBorrowed := k.GetBorrowerBorrows(ctx, addr)
@@ -122,6 +168,17 @@ func (k *Keeper) userMaxBorrow(ctx sdk.Context, addr sdk.AccAddress, denom strin
 		return sdk.NewCoin(denom, sdk.ZeroInt()), nil
 	}
 
+	// calculate weighted borrowed value for the account, using the higher of spot or historic prices
+	weightedBorrowedValue, err := k.ValueWithBorrowFactor(ctx, totalBorrowed, types.PriceModeHigh)
+	if nonOracleError(err) {
+		// non-oracle errors fail the transaction (or query)
+		return sdk.Coin{}, err
+	}
+	if err != nil {
+		// oracle errors cause max borrow to be zero
+		return sdk.NewCoin(denom, sdk.ZeroInt()), nil
+	}
+
 	// calculate borrow limit for the account, using only collateral whose price is known
 	borrowLimit, err := k.VisibleBorrowLimit(ctx, totalCollateral)
 	if err != nil {
@@ -132,11 +189,27 @@ func (k *Keeper) userMaxBorrow(ctx sdk.Context, addr sdk.AccAddress, denom strin
 		return sdk.NewCoin(denom, sdk.ZeroInt()), nil
 	}
 
+	// calculate collateral value limit for the account, using only collateral whose price is known
+	collateralValue, err := k.VisibleCollateralValue(ctx, totalCollateral, types.PriceModeLow)
+	if err != nil {
+		return sdk.Coin{}, err
+	}
+	// borrowers above their borrow factor borrow limit cannot borrow
+	if collateralValue.LTE(weightedBorrowedValue) {
+		return sdk.NewCoin(denom, sdk.ZeroInt()), nil
+	}
+
 	// determine the USD amount of borrow limit that is currently unused
 	unusedBorrowLimit := borrowLimit.Sub(borrowedValue)
 
+	// determine the USD amount that can be borrowed according to borrow factor limit
+	maxBorrowValueIncrease := collateralValue.Sub(weightedBorrowedValue).Quo(token.BorrowFactor())
+
+	// finds the most restrictive of regular borrow limit and borrow factor limit
+	valueToBorrow := sdk.MinDec(unusedBorrowLimit, maxBorrowValueIncrease)
+
 	// determine max borrow, using the higher of spot or historic prices for the token to borrow
-	maxBorrow, err := k.TokenWithValue(ctx, denom, unusedBorrowLimit, types.PriceModeHigh)
+	maxBorrow, err := k.TokenWithValue(ctx, denom, valueToBorrow, types.PriceModeHigh)
 	if nonOracleError(err) {
 		// non-oracle errors fail the transaction (or query)
 		return sdk.Coin{}, err
@@ -177,7 +250,11 @@ func (k *Keeper) maxCollateralFromShare(ctx sdk.Context, denom string) (sdkmath.
 	thisDenomCollateral := sdk.NewCoin(denom, systemCollateral.AmountOf(denom))
 
 	// get USD collateral value for all other denoms, skipping those which are missing oracle prices
-	otherDenomsValue, err := k.VisibleCollateralValue(ctx, systemCollateral.Sub(thisDenomCollateral))
+	otherDenomsValue, err := k.VisibleCollateralValue(
+		ctx,
+		systemCollateral.Sub(thisDenomCollateral),
+		types.PriceModeSpot,
+	)
 	if err != nil {
 		return sdk.ZeroInt(), err
 	}

x/leverage/keeper/liquidate.go

@@ -33,7 +33,7 @@ func (k Keeper) getLiquidationAmounts(
 	if err != nil {
 		return sdk.Coin{}, sdk.Coin{}, sdk.Coin{}, err
 	}
-	collateralValue, err := k.CalculateCollateralValue(ctx, borrowerCollateral)
+	collateralValue, err := k.CalculateCollateralValue(ctx, borrowerCollateral, types.PriceModeSpot)
 	if err != nil {
 		return sdk.Coin{}, sdk.Coin{}, sdk.Coin{}, err
 	}