From 79db31a4e730f05a8b4cf737db1ac038af599ce9 Mon Sep 17 00:00:00 2001
From: sr33j <srijithpoduval@gmail.com>
Date: Mon, 23 Sep 2024 16:28:37 -0400
Subject: [PATCH] add check for invalid skew factor (#2249)

---
 protocol/x/vault/types/errors.go      |  5 ++++
 protocol/x/vault/types/params.go      |  9 +++++++
 protocol/x/vault/types/params_test.go | 37 +++++++++++++++++++++++++++
 3 files changed, 51 insertions(+)

diff --git a/protocol/x/vault/types/errors.go b/protocol/x/vault/types/errors.go
index 4b4d541dec..3374cd11fd 100644
--- a/protocol/x/vault/types/errors.go
+++ b/protocol/x/vault/types/errors.go
@@ -155,4 +155,9 @@ var (
 		30,
 		"Shares must be positive",
 	)
+	ErrInvalidSkewFactor = errorsmod.Register(
+		ModuleName,
+		31,
+		"Skew factor times order_size_pct must be less than 2 to avoid skewing over the spread",
+	)
 )
diff --git a/protocol/x/vault/types/params.go b/protocol/x/vault/types/params.go
index 4236d981d1..578f7030cb 100644
--- a/protocol/x/vault/types/params.go
+++ b/protocol/x/vault/types/params.go
@@ -2,6 +2,7 @@ package types
 
 import (
 	"math"
+	"math/big"
 
 	"github.com/dydxprotocol/v4-chain/protocol/dtypes"
 	"github.com/dydxprotocol/v4-chain/protocol/lib"
@@ -42,6 +43,14 @@ func (p QuotingParams) Validate() error {
 	if p.ActivationThresholdQuoteQuantums.Sign() < 0 {
 		return ErrInvalidActivationThresholdQuoteQuantums
 	}
+	// Skew factor times order_size_pct must be less than 2 to avoid skewing over the spread
+	skewFactor := new(big.Int).SetUint64(uint64(p.SkewFactorPpm))
+	orderSizePct := new(big.Int).SetUint64(uint64(p.OrderSizePctPpm))
+	skewFactorOrderSizePctProduct := new(big.Int).Mul(skewFactor, orderSizePct)
+	skewFactorOrderSizePctProductThreshold := big.NewInt(2_000_000 * 1_000_000)
+	if skewFactorOrderSizePctProduct.Cmp(skewFactorOrderSizePctProductThreshold) >= 0 {
+		return ErrInvalidSkewFactor
+	}
 
 	return nil
 }
diff --git a/protocol/x/vault/types/params_test.go b/protocol/x/vault/types/params_test.go
index 9705241f61..4d72dd9d5f 100644
--- a/protocol/x/vault/types/params_test.go
+++ b/protocol/x/vault/types/params_test.go
@@ -1,6 +1,7 @@
 package types_test
 
 import (
+	"math"
 	"testing"
 
 	"github.com/dydxprotocol/v4-chain/protocol/dtypes"
@@ -80,6 +81,42 @@ func TestValidateQuotingParams(t *testing.T) {
 			},
 			expectedErr: types.ErrInvalidActivationThresholdQuoteQuantums,
 		},
+		"Failure - SkewFactorPpm is high. Product of SkewFactorPpm and OrderSizePctPpm is above threshold.": {
+			params: types.QuotingParams{
+				Layers:                           2,
+				SpreadMinPpm:                     3_000,
+				SpreadBufferPpm:                  1_500,
+				SkewFactorPpm:                    20_000_000,
+				OrderSizePctPpm:                  100_000,
+				OrderExpirationSeconds:           5,
+				ActivationThresholdQuoteQuantums: dtypes.NewInt(1),
+			},
+			expectedErr: types.ErrInvalidSkewFactor,
+		},
+		"Failure - OrderSizePctPpm is high. Product of SkewFactorPpm and OrderSizePctPpm is above threshold.": {
+			params: types.QuotingParams{
+				Layers:                           2,
+				SpreadMinPpm:                     3_000,
+				SpreadBufferPpm:                  1_500,
+				SkewFactorPpm:                    2_000_000,
+				OrderSizePctPpm:                  1_000_000,
+				OrderExpirationSeconds:           5,
+				ActivationThresholdQuoteQuantums: dtypes.NewInt(1),
+			},
+			expectedErr: types.ErrInvalidSkewFactor,
+		},
+		"Failure - Both OrderSizePctPpm and SkewFactorPpm are MaxUint32. The product is above the threshold.": {
+			params: types.QuotingParams{
+				Layers:                           2,
+				SpreadMinPpm:                     3_000,
+				SpreadBufferPpm:                  1_500,
+				SkewFactorPpm:                    math.MaxUint32,
+				OrderSizePctPpm:                  math.MaxUint32,
+				OrderExpirationSeconds:           5,
+				ActivationThresholdQuoteQuantums: dtypes.NewInt(1),
+			},
+			expectedErr: types.ErrInvalidSkewFactor,
+		},
 	}
 
 	for name, tc := range tests {