Bauer - If the token id has been burned, the borrower will not be able to repay the loan

[sherlock-admin2]

Bauer

medium

If the token id has been burned, the borrower will not be able to repay the loan

Summary

When a lender has burned the token ID, rendering the protocol incapable of increasing liquidity.

Vulnerability Detail

During the repay process, the protocol will call the increaseLiquidity function of underlyingPositionManager contract with IncreaseLiquidityParams struct as argument.

 function _increaseLiquidity(
        address saleToken,
        address holdToken,
        LoanInfo memory loan,
        uint256 amount0,
        uint256 amount1
    ) private {
        // increase if not equal to zero to avoid rounding down the amount of restored liquidity.
        if (amount0 > 0) ++amount0;
        if (amount1 > 0) ++amount1;
        // Call the increaseLiquidity function of underlyingPositionManager contract
        // with IncreaseLiquidityParams struct as argument
        (uint128 restoredLiquidity, , ) = underlyingPositionManager.increaseLiquidity(
            INonfungiblePositionManager.IncreaseLiquidityParams({
                tokenId: loan.tokenId,
                amount0Desired: amount0,
                amount1Desired: amount1,
                amount0Min: 0,
                amount1Min: 0,
                deadline: block.timestamp
            })
        );

However,If the lender has already burned the token ID, the protocol will be unable to increase liquidity, resulting in the borrower being unable to repay their loan, causing bad debt in the protocol.

Impact

The borrowers will be unable to repay their loan, causing bad debt in the protocol.

Code Snippet

https://github.com/sherlock-audit/2023-10-real-wagmi/blob/main/wagmi-leverage/contracts/abstract/LiquidityManager.sol#L386-L407

Tool used

Manual Review

Recommendation

To address this issue, the protocol should implement a mechanism to verify the availability and validity of token IDs before attempting to increase liquidity. This could involve a check to ensure that the token ID is still valid and not "burned" or otherwise unusable.

Duplicate of #78