fix: only award redeem premium upto the secure threshold

crates/fee/src/lib.rs

@@ -427,6 +427,14 @@ impl<T: Config> Pallet<T> {
         amount.checked_rounded_mul(&<PremiumRedeemFee<T>>::get(), Rounding::NearestPrefUp)
     }
 
+    /// Get the premium redeem reward rate.
+    ///
+    /// # Returns
+    /// Returns the premium redeem reward rate.
+    pub fn premium_redeem_reward_rate() -> UnsignedFixedPoint<T> {
+        <PremiumRedeemFee<T>>::get()
+    }
+
     /// Calculate punishment fee for a Vault that fails to execute a redeem
     /// request before the expiry.
     ///

crates/fee/src/types.rs

@@ -5,7 +5,7 @@ use scale_info::TypeInfo;
 
 pub(crate) type BalanceOf<T> = <T as currency::Config>::Balance;
 
-pub(crate) type UnsignedFixedPoint<T> = <T as currency::Config>::UnsignedFixedPoint;
+pub type UnsignedFixedPoint<T> = <T as currency::Config>::UnsignedFixedPoint;
 
 pub(crate) type DefaultVaultId<T> = VaultId<<T as frame_system::Config>::AccountId, CurrencyId<T>>;
 

crates/issue/src/ext.rs

@@ -95,7 +95,7 @@ pub(crate) mod vault_registry {
     }
 
     pub fn ensure_not_banned<T: crate::Config>(vault_id: &DefaultVaultId<T>) -> DispatchResult {
-        <vault_registry::Pallet<T>>::_ensure_not_banned(vault_id)
+        <vault_registry::Pallet<T>>::ensure_not_banned(vault_id)
     }
 
     pub fn decrease_to_be_issued_tokens<T: crate::Config>(

crates/redeem/src/benchmarking.rs

@@ -158,6 +158,13 @@ pub mod benchmarks {
 
         #[extrinsic_call]
         _(RawOrigin::Signed(caller), amount, btc_address, vault_id.clone());
+        let redeem_vault_request = Redeem::<T>::get_redeem_requests_for_vault(vault_id.account_id.clone());
+        let redeem_request_hash = redeem_vault_request
+            .first()
+            .cloned()
+            .unwrap_or_else(|| panic!("No redeem request found"));
+        let redeem_struct = RedeemRequests::<T>::get(redeem_request_hash).unwrap();
+        assert!(redeem_struct.premium > 0);
     }
 
     #[benchmark]

crates/redeem/src/ext.rs

@@ -44,6 +44,12 @@ pub(crate) mod vault_registry {
     use frame_support::dispatch::{DispatchError, DispatchResult};
     use vault_registry::types::{CurrencyId, CurrencySource, DefaultVault};
 
+    pub fn get_vault_max_premium_redeem<T: crate::Config>(
+        vault_id: &DefaultVaultId<T>,
+    ) -> Result<Amount<T>, DispatchError> {
+        <vault_registry::Pallet<T>>::get_vault_max_premium_redeem(vault_id)
+    }
+
     pub fn get_liquidated_collateral<T: crate::Config>(
         vault_id: &DefaultVaultId<T>,
     ) -> Result<Amount<T>, DispatchError> {
@@ -120,7 +126,7 @@ pub(crate) mod vault_registry {
     }
 
     pub fn ensure_not_banned<T: crate::Config>(vault_id: &DefaultVaultId<T>) -> DispatchResult {
-        <vault_registry::Pallet<T>>::_ensure_not_banned(vault_id)
+        <vault_registry::Pallet<T>>::ensure_not_banned(vault_id)
     }
 
     pub fn is_vault_below_premium_threshold<T: crate::Config>(
@@ -207,6 +213,7 @@ pub(crate) mod oracle {
 #[cfg_attr(test, mockable)]
 pub(crate) mod fee {
     use currency::Amount;
+    use fee::types::UnsignedFixedPoint;
     use frame_support::dispatch::{DispatchError, DispatchResult};
 
     pub fn fee_pool_account_id<T: crate::Config>() -> T::AccountId {
@@ -225,7 +232,7 @@ pub(crate) mod fee {
         <fee::Pallet<T>>::get_punishment_fee(amount)
     }
 
-    pub fn get_premium_redeem_fee<T: crate::Config>(amount: &Amount<T>) -> Result<Amount<T>, DispatchError> {
-        <fee::Pallet<T>>::get_premium_redeem_fee(amount)
+    pub fn premium_redeem_reward_rate<T: crate::Config>() -> UnsignedFixedPoint<T> {
+        <fee::Pallet<T>>::premium_redeem_reward_rate()
     }
 }

crates/redeem/src/lib.rs

@@ -32,7 +32,7 @@ pub use crate::types::{DefaultRedeemRequest, RedeemRequest, RedeemRequestStatus}
 use crate::types::{BalanceOf, RedeemRequestExt, Version};
 use bitcoin::types::FullTransactionProof;
 use btc_relay::BtcAddress;
-use currency::Amount;
+use currency::{Amount, Rounding};
 use frame_support::{
     dispatch::{DispatchError, DispatchResult},
     ensure,
@@ -456,6 +456,7 @@ mod self_redeem {
         Ok(())
     }
 }
+
 // "Internal" functions, callable by code.
 #[cfg_attr(test, mockable)]
 impl<T: Config> Pallet<T> {
@@ -501,23 +502,28 @@ impl<T: Config> Pallet<T> {
             Error::<T>::AmountBelowDustAmount
         );
 
-        // vault will get rid of the btc + btc_inclusion_fee
-        ext::vault_registry::try_increase_to_be_redeemed_tokens::<T>(&vault_id, &vault_to_be_burned_tokens)?;
-
-        // lock full amount (inc. fee)
-        amount_wrapped.lock_on(&redeemer)?;
-        let redeem_id = ext::security::get_secure_id::<T>(&redeemer);
-
         let below_premium_redeem = ext::vault_registry::is_vault_below_premium_threshold::<T>(&vault_id)?;
         let currency_id = vault_id.collateral_currency();
 
         let premium_collateral = if below_premium_redeem {
             let redeem_amount_wrapped_in_collateral = user_to_be_received_btc.convert_to(currency_id)?;
-            ext::fee::get_premium_redeem_fee::<T>(&redeem_amount_wrapped_in_collateral)?
+            let premium_redeem_rate = ext::fee::premium_redeem_reward_rate::<T>();
+            let premium_for_redeem_amount = redeem_amount_wrapped_in_collateral
+                .checked_rounded_mul(&premium_redeem_rate, Rounding::NearestPrefUp)?;
+
+            let max_premium = ext::vault_registry::get_vault_max_premium_redeem(&vault_id)?;
+            max_premium.min(&premium_for_redeem_amount)?
         } else {
             Amount::zero(currency_id)
         };
 
+        // vault will get rid of the btc + btc_inclusion_fee
+        ext::vault_registry::try_increase_to_be_redeemed_tokens::<T>(&vault_id, &vault_to_be_burned_tokens)?;
+
+        // lock full amount (inc. fee)
+        amount_wrapped.lock_on(&redeemer)?;
+        let redeem_id = ext::security::get_secure_id::<T>(&redeemer);
+
         Self::release_replace_collateral(&vault_id, &vault_to_be_burned_tokens)?;
 
         Self::insert_redeem_request(

crates/replace/src/ext.rs

@@ -81,7 +81,7 @@ pub(crate) mod vault_registry {
     }
 
     pub fn ensure_not_banned<T: crate::Config>(vault_id: &DefaultVaultId<T>) -> DispatchResult {
-        <vault_registry::Pallet<T>>::_ensure_not_banned(vault_id)
+        <vault_registry::Pallet<T>>::ensure_not_banned(vault_id)
     }
 
     pub fn try_increase_to_be_issued_tokens<T: crate::Config>(

crates/vault-registry/src/ext.rs

@@ -113,9 +113,14 @@ pub(crate) mod capacity {
 #[cfg_attr(test, mockable)]
 pub(crate) mod fee {
     use crate::DefaultVaultId;
+    use fee::types::UnsignedFixedPoint;
     use frame_support::dispatch::DispatchResult;
 
     pub fn distribute_all_vault_rewards<T: crate::Config>(vault_id: &DefaultVaultId<T>) -> DispatchResult {
         <fee::Pallet<T>>::distribute_all_vault_rewards(vault_id)
     }
+
+    pub fn premium_redeem_reward_rate<T: crate::Config>() -> UnsignedFixedPoint<T> {
+        <fee::Pallet<T>>::premium_redeem_reward_rate()
+    }
 }

crates/vault-registry/src/lib.rs

@@ -774,6 +774,53 @@ impl<T: Config> Pallet<T> {
         ext::staking::total_current_stake::<T>(vault_id)
     }
 
+    /// Calculate the maximum premium that can be given by a vault.
+    ///
+    /// # Arguments
+    /// * `vault_id` - The identifier of the vault for which the maximum premium is being calculated.
+    ///
+    /// # Returns
+    /// Returns a `Result` containing the calculated maximum premium as an `Amount<T>`.
+    pub fn get_vault_max_premium_redeem(vault_id: &DefaultVaultId<T>) -> Result<Amount<T>, DispatchError> {
+        // The goal of premium redeems is to get the vault back the a healthy collateralization ratio. As such,
+        // we only award a premium for the amount of tokens required to get the vault back to secure threshold.
+
+        // The goal of premium redeems is to get the vault back the a healthy collateralization ratio. As such,
+        // we only award a premium for the amount of tokens required to get the vault back to secure threshold.
+        // The CollateralizationRate is defined as `totalCollateral / convertToCollateral(totalTokens)`
+        // When paying a premium, the collateralization rate gets updated according to the following formula:
+        //     `NewCollateralization = (oldCol - awardedPremium) / ( oldTokens*EXCH - awardedPremium/FEE)`
+        // To calculate the maximum premium we are willing to pay, we set the newCollateralization to
+        // the secure threshold, which gives:
+        //     `SECURE = (oldCol - awardedPremium) / (oldTokens*EXCH - awardedPremium/FEE)``
+        // We can rewrite this formula to calculate the `premium` amount that would get us to the secure threshold:
+        //     `maxPremium = (oldTokens * EXCH * SECURE - oldCol) * (FEE / (SECURE - FEE))`
+        // Which can be interpreted as:
+        //     `maxPremium = missingCollateral * (FEE / (SECURE - FEE))
+
+        // Note that to prevent repeated premium redeems while waiting for execution, we use to_be_backed_tokens
+        // for `oldCol`, which takes into account pending issues and redeems
+        let to_be_backed_tokens = Self::vault_to_be_backed_tokens(&vault_id)?;
+        let global_secure_threshold = Self::get_global_secure_threshold(&vault_id.currencies)?;
+        let premium_redeem_rate = ext::fee::premium_redeem_reward_rate::<T>();
+
+        let required_collateral = Self::required_collateral(&vault_id, &to_be_backed_tokens, global_secure_threshold)?;
+
+        let current_collateral = Self::get_backing_collateral(&vault_id)?;
+        let missing_collateral = required_collateral.saturating_sub(&current_collateral)?;
+
+        let factor = premium_redeem_rate
+            .checked_div(
+                &global_secure_threshold
+                    .checked_sub(&premium_redeem_rate)
+                    .ok_or(ArithmeticError::Underflow)?,
+            )
+            .ok_or(ArithmeticError::DivisionByZero)?;
+
+        let max_premium = missing_collateral.checked_mul(&factor)?;
+        Ok(max_premium)
+    }
+
     pub fn get_liquidated_collateral(vault_id: &DefaultVaultId<T>) -> Result<Amount<T>, DispatchError> {
         let vault = Self::get_vault_from_id(vault_id)?;
         Ok(Amount::new(vault.liquidated_collateral, vault_id.currencies.collateral))
@@ -1089,6 +1136,42 @@ impl<T: Config> Pallet<T> {
         Ok(())
     }
 
+    /// Get the global secure threshold for a specified currency pair.
+    ///
+    /// # Arguments
+    /// * `currency_pair` - The currency pair for which to retrieve the global secure threshold.
+    ///
+    /// # Returns
+    /// Returns the global secure threshold for the specified currency pair or an error if the threshold is not set.
+    ///
+    /// # Errors
+    /// * `ThresholdNotSet` - If the secure collateral threshold for the given `currency_pair` is not set.
+    pub fn get_global_secure_threshold(
+        currency_pair: &VaultCurrencyPair<CurrencyId<T>>,
+    ) -> Result<UnsignedFixedPoint<T>, DispatchError> {
+        let global_secure_threshold =
+            Self::secure_collateral_threshold(&currency_pair).ok_or(Error::<T>::ThresholdNotSet)?;
+        Ok(global_secure_threshold)
+    }
+
+    /// Calculate the required collateral for a vault given the specified parameters.
+    ///
+    /// # Arguments
+    /// * `vault_id` - The identifier of the vault for which to calculate the required collateral.
+    /// * `to_be_backed_tokens` - The amount of tokens to be backed by collateral.
+    /// * `secure_threshold` - The secure collateral threshold to be applied in the calculation.
+    ///
+    /// # Returns
+    /// Returns the required collateral amount or an error if the calculation fails.
+    pub fn required_collateral(
+        vault_id: &DefaultVaultId<T>,
+        to_be_backed_tokens: &Amount<T>,
+        secure_threshold: UnsignedFixedPoint<T>,
+    ) -> Result<Amount<T>, DispatchError> {
+        let issued_tokens_in_collateral = to_be_backed_tokens.convert_to(vault_id.collateral_currency())?; // oldTokens * EXCH
+        issued_tokens_in_collateral.checked_rounded_mul(&secure_threshold, Rounding::NearestPrefUp)
+    }
+
     /// Adds an amount tokens to the to-be-redeemed tokens balance of a vault.
     /// This function serves as a prevention against race conditions in the
     /// redeem and replace procedures. If, for example, a vault would receive
@@ -1482,7 +1565,7 @@ impl<T: Config> Pallet<T> {
         Ok(())
     }
 
-    pub fn _ensure_not_banned(vault_id: &DefaultVaultId<T>) -> DispatchResult {
+    pub fn ensure_not_banned(vault_id: &DefaultVaultId<T>) -> DispatchResult {
         let vault = Self::get_active_rich_vault_from_id(&vault_id)?;
         vault.ensure_not_banned()
     }
@@ -1499,8 +1582,11 @@ impl<T: Config> Pallet<T> {
     }
 
     pub fn is_vault_below_premium_threshold(vault_id: &DefaultVaultId<T>) -> Result<bool, DispatchError> {
+        let vault = Self::get_rich_vault_from_id(&vault_id)?;
         let threshold = Self::premium_redeem_threshold(&vault_id.currencies).ok_or(Error::<T>::ThresholdNotSet)?;
-        Self::is_vault_below_threshold(vault_id, threshold)
+        let collateral = Self::get_backing_collateral(vault_id)?;
+
+        Self::is_collateral_below_threshold(&collateral, &vault.to_be_backed_tokens()?, threshold)
     }
 
     /// check if the vault is below the liquidation threshold.
@@ -1597,13 +1683,16 @@ impl<T: Config> Pallet<T> {
     /// The redeemable tokens are the currently vault.issued_tokens - the vault.to_be_redeemed_tokens
     pub fn get_premium_redeem_vaults() -> Result<Vec<(DefaultVaultId<T>, Amount<T>)>, DispatchError> {
         let mut suitable_vaults = Vaults::<T>::iter()
-            .filter_map(|(vault_id, vault)| {
-                let rich_vault: RichVault<T> = vault.into();
-
-                let redeemable_tokens = rich_vault.redeemable_tokens().ok()?;
-
-                if !redeemable_tokens.is_zero() && Self::is_vault_below_premium_threshold(&vault_id).unwrap_or(false) {
-                    Some((vault_id, redeemable_tokens))
+            .filter_map(|(vault_id, _vault)| {
+                let max_premium_in_collateral = Self::get_vault_max_premium_redeem(&vault_id).ok()?;
+                let premium_redeemable_tokens =
+                    max_premium_in_collateral.convert_to(vault_id.wrapped_currency()).ok()?;
+
+                if Self::ensure_not_banned(&vault_id).is_ok()
+                    && !premium_redeemable_tokens.is_zero()
+                    && Self::is_vault_below_premium_threshold(&vault_id).unwrap_or(false)
+                {
+                    Some((vault_id, premium_redeemable_tokens))
                 } else {
                     None
                 }
@@ -1886,6 +1975,11 @@ impl<T: Config> Pallet<T> {
         collateral.convert_to(wrapped_currency)?.checked_div(&threshold)
     }
 
+    pub fn vault_to_be_backed_tokens(vault_id: &DefaultVaultId<T>) -> Result<Amount<T>, DispatchError> {
+        let vault = Self::get_active_rich_vault_from_id(vault_id)?;
+        vault.to_be_backed_tokens()
+    }
+
     pub fn new_vault_deposit_address(
         vault_id: &DefaultVaultId<T>,
         secure_id: H256,