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fix: junior withdrawal ordering unfairness during active insurance loss #124

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Merged
dcccrypto merged 1 commit into from
Apr 11, 2026
Merged

fix: junior withdrawal ordering unfairness during active insurance loss #124

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27 changes: 17 additions & 10 deletions src/processor.rs
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Original file line number Diff line number Diff line change
Expand Up @@ -905,17 +905,24 @@ fn process_withdraw(
// (supply=0 but value>0) and locks tokens permanently in the vault.
pool.set_junior_balance(0);
} else {
// Proportional decrease of the RAW junior_balance based on LP share,
// not the loss-adjusted withdrawal_amount. This keeps the raw balance
// in sync with the remaining LP holders' proportional claim.
let jb = pool.junior_balance();
let raw_decrease = (lp_amount as u128)
.checked_mul(jb as u128)
.and_then(|v| v.checked_div(junior_lp_before as u128))
.map(|v| v as u64)
.ok_or(StakeError::Overflow)?;
// Decrease junior_balance by withdrawal_amount (the loss-adjusted
// collateral actually leaving the vault), NOT by a proportional share
// of the raw balance.
//
// During active insurance loss, withdrawal_amount < proportional raw
// share because it is based on effective_junior_balance (post-loss).
// Using the larger proportional raw decrease causes gross_senior
// (= gross_pool - junior_balance) to inflate after each junior
// withdrawal, making distribute_loss over-penalize remaining juniors.
// The last junior withdrawer can receive zero even though they hold
// a fair share of the effective pool.
//
// By subtracting withdrawal_amount from both total_withdrawn (above)
// and junior_balance here, gross_senior stays constant across partial
// junior withdrawals, preserving per-LP effective value.
pool.set_junior_balance(
jb.checked_sub(raw_decrease)
pool.junior_balance()
.checked_sub(withdrawal_amount)
.ok_or(StakeError::Overflow)?,
);
}
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