[devin-ai-integration]

Note

On main, when the Midnight adapter sells credit below its amortized value, only the sold market's rate absorbs the shortfall, and the sale reverts once that market's remaining interest runs out. #1084 lets other markets absorb it too, but one at a time in an order the allocator picks. This PR spreads the shortfall over all markets in proportion to each one's remaining interest, so every market's remaining interest drops by the same fraction and nobody has to choose an order. It's an alternative to #1084, branched from main.

interest_i = netCredit_i - amortizedValue_i        // every market
require(shortfall <= Σ interest_i, ShortfallTooHigh)
for each market i with interest_i > 0:
    reduction_i = ceil(shortfall * interest_i / Σ interest)
    netRate_i   = rateFor(netCredit_i, amortizedValue_i + reduction_i)   // rounds down
    emit ReduceRate(id_i, netRate_i)

Context

• This came out of a design call. Cross-market absorption keeps per-market rates and doesn't pass the loss on to future buys, but choosing or ordering the absorbing markets ([midnight adapter] cross-market rate reduction #1084's swapMarkets) felt unnatural. Proportional reduction was the alternative raised.
• Force-sellable markets absorb their share like any other market ([midnight adapter] cross-market rate reduction #1084 skips them).
• Each market's net credit is read as in realAssets(): markets without bad debt (lossFactor == 0) use their stored net credit, and markets with bad debt use their current net credit. The sale reverts with OtherSellInProgress if any other market has a sale in progress (liquidationLocked), since that market's stored net credit is stale until its own onSell runs. Matured and zero-rate markets have no interest left, so they absorb nothing.

Impact of merging

• A non-force-sellable sale with a shortfall can now cut the rates of every market, force-sellable ones included, not just the sold one. A full sale below amortized value goes through as long as the other markets hold enough interest.
• The adapter's amortized value drops only by the assets it receives. The sale reverts with ShortfallTooHigh when the shortfall is larger than the remaining interest of all markets combined.
• A shortfall sale nested inside a sale of the adapter's credit in another market therefore reverts with OtherSellInProgress. Nested sales at or above amortized value are unaffected.
• Event change: Sell no longer carries the rate. Each market whose rate changes emits ReduceRate(marketId, newRate) instead. Sell gains a last field, absorbedShortfall: the shortfall the markets absorbed, i.e. the increase of their amortized values as realAssets computes them, which is what the sale consumed from shortfallAllowance. It is at least the shortfall, and 0 for forceSellable sales and sales without a shortfall.

Special things to note

• Every sale with a shortfall now loops over all marketIds twice (up to 250), with a lossFactor call on each market (plus liquidationLocked and updatePositionView for markets with bad debt). Sales with no shortfall skip the loop.
• Each share rounds up and each new rate rounds down, so the markets' amortized values go up by more than the shortfall: under 1 wei per market from the shares, and up to amortizedValue * ttm / 1e18 per market from the rate truncation. shortfallAllowance is charged with that increase, measured with the same rounding as realAssets, so it bounds exactly what the vault's valuation gains and repeated small sales cannot consume more than it. Each market's amortized value rounds down in the loop, as in realAssets. A share never exceeds its market's interest, so no rate goes negative.
• MidnightAdapterFactory is 23,748 B at runtime, 828 B under the EIP-170 limit (solc).

Change outline

• Behavior change, base main, no parent PR.
• onSell: the first pass records each market's net credit and amortized value in two uint256[] and sums their interest. The second pass skips markets with no interest and applies each market's proportional share. The sold market goes through the same lossFactor net-credit path as the others.
• marketData.netCredit is updated before the loop.
• Certora MarketIdsMidnightAdapter.spec: added NONDET summaries for liquidationLocked and updatePositionView.

Evidence

• New tests in MidnightAdapterTest cover splits across 2–3 markets with the same interest-reduction fraction, markets with bad debt, full sales absorbed by other markets, force-sellable markets absorbing their share, nested shortfall sales reverting, matured markets, insufficient total interest, and the accounting of realAssets.
• MidnightAdapterTest passes on adf7169 (288 tests, Solar build). Gas for a sale whose shortfall is spread over 1–250 markets is in this thread. forge build --sizes passes on adf7169. Certora wasn't run locally.

Related: PRO-257

Link to Devin session: https://app.devin.ai/sessions/34b1025e5fb04ad5a530c4099c4d08b8
Open in Devin Desktop: https://app.devin.ai/desktop/session/34b1025e5fb04ad5a530c4099c4d08b8?variant=devin

[devin-ai-integration]

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[chatgpt-codex-connector]

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