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test: x/mint thirdening - identify rounding errors (#1874)
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* test: x/mint thirdening

* add logic for estimating supply

* estimate expected supply w/o offset

* identify the sources of rounding issues

* transcribe calculations

* clean up for readability

* Update x/mint/keeper/hooks_test.go

Co-authored-by: Aleksandr Bezobchuk <[email protected]>

* fix merge conflicts and link a correct issue

Co-authored-by: Aleksandr Bezobchuk <[email protected]>
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@p0mvn @alexanderbez
p0mvn and alexanderbez authored Jun 30, 2022
1 parent ee48cf5 commit d9a4f94
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214 changes: 214 additions & 0 deletions x/mint/keeper/hooks_test.go
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Expand Up @@ -220,6 +220,220 @@ func TestEndOfEpochNoDistributionWhenIsNotYetStartTime(t *testing.T) {
require.Equal(t, lastReductionPeriod, mintParams.MintingRewardsDistributionStartEpoch)
}

// TODO: Remove after rounding errors are addressed and resolved.
// Make sure that more specific test specs are added to validate the expected
// supply for correctness.
//
// Ref: https://github.com/osmosis-labs/osmosis/issues/1917
func TestAfterEpochEnd_FirstYearThirdening_RealParameters(t *testing.T) {
// Most values in this test are taken from mainnet genesis to mimic real-world behavior:
// https://github.com/osmosis-labs/networks/raw/main/osmosis-1/genesis.json
const (
reductionPeriodInEpochs = 365
mintingRewardsDistributionStartEpoch int64 = 1
thirdeningEpochNum int64 = reductionPeriodInEpochs + mintingRewardsDistributionStartEpoch

// different from mainnet since the difference is insignificant for testing purposes.
mintDenom = "stake"
genesisEpochProvisions = "821917808219.178082191780821917"
epochIdentifier = "day"

// actual value taken from mainnet for sanity checking calculations.
mainnetThirdenedProvisions = "547945205479.452055068493150684"

developerAccountBalance = 225_000_000_000_000
)

var (
reductionFactor = sdk.NewDec(2).Quo(sdk.NewDec(3))
)

app := osmoapp.Setup(false)
ctx := app.BaseApp.NewContext(false, tmproto.Header{})

genesisEpochProvisionsDec, err := sdk.NewDecFromStr(genesisEpochProvisions)
require.NoError(t, err)

mintParams := types.Params{
MintDenom: mintDenom,
GenesisEpochProvisions: genesisEpochProvisionsDec,
EpochIdentifier: epochIdentifier,
ReductionPeriodInEpochs: reductionPeriodInEpochs,
ReductionFactor: reductionFactor,
DistributionProportions: types.DistributionProportions{
Staking: sdk.NewDecWithPrec(25, 2),
PoolIncentives: sdk.NewDecWithPrec(45, 2),
DeveloperRewards: sdk.NewDecWithPrec(25, 2),
CommunityPool: sdk.NewDecWithPrec(05, 2),
},
WeightedDeveloperRewardsReceivers: []types.WeightedAddress{
{
Address: "osmo14kjcwdwcqsujkdt8n5qwpd8x8ty2rys5rjrdjj",
Weight: sdk.NewDecWithPrec(2887, 4),
},
{
Address: "osmo1gw445ta0aqn26suz2rg3tkqfpxnq2hs224d7gq",
Weight: sdk.NewDecWithPrec(229, 3),
},
{
Address: "osmo13lt0hzc6u3htsk7z5rs6vuurmgg4hh2ecgxqkf",
Weight: sdk.NewDecWithPrec(1625, 4),
},
{
Address: "osmo1kvc3he93ygc0us3ycslwlv2gdqry4ta73vk9hu",
Weight: sdk.NewDecWithPrec(109, 3),
},
{
Address: "osmo19qgldlsk7hdv3ddtwwpvzff30pxqe9phq9evxf",
Weight: sdk.NewDecWithPrec(995, 3).Quo(sdk.NewDec(10)), // 0.0995
},
{
Address: "osmo19fs55cx4594een7qr8tglrjtt5h9jrxg458htd",
Weight: sdk.NewDecWithPrec(6, 1).Quo(sdk.NewDec(10)), // 0.06
},
{
Address: "osmo1ssp6px3fs3kwreles3ft6c07mfvj89a544yj9k",
Weight: sdk.NewDecWithPrec(15, 2).Quo(sdk.NewDec(10)), // 0.015
},
{
Address: "osmo1c5yu8498yzqte9cmfv5zcgtl07lhpjrj0skqdx",
Weight: sdk.NewDecWithPrec(1, 1).Quo(sdk.NewDec(10)), // 0.01
},
{
Address: "osmo1yhj3r9t9vw7qgeg22cehfzj7enwgklw5k5v7lj",
Weight: sdk.NewDecWithPrec(75, 2).Quo(sdk.NewDec(100)), // 0.0075
},
{
Address: "osmo18nzmtyn5vy5y45dmcdnta8askldyvehx66lqgm",
Weight: sdk.NewDecWithPrec(7, 1).Quo(sdk.NewDec(100)), // 0.007
},
{
Address: "osmo1z2x9z58cg96ujvhvu6ga07yv9edq2mvkxpgwmc",
Weight: sdk.NewDecWithPrec(5, 1).Quo(sdk.NewDec(100)), // 0.005
},
{
Address: "osmo1tvf3373skua8e6480eyy38avv8mw3hnt8jcxg9",
Weight: sdk.NewDecWithPrec(25, 2).Quo(sdk.NewDec(100)), // 0.0025
},
{
Address: "osmo1zs0txy03pv5crj2rvty8wemd3zhrka2ne8u05n",
Weight: sdk.NewDecWithPrec(25, 2).Quo(sdk.NewDec(100)), // 0.0025
},
{
Address: "osmo1djgf9p53n7m5a55hcn6gg0cm5mue4r5g3fadee",
Weight: sdk.NewDecWithPrec(1, 1).Quo(sdk.NewDec(100)), // 0.001
},
{
Address: "osmo1488zldkrn8xcjh3z40v2mexq7d088qkna8ceze",
Weight: sdk.NewDecWithPrec(8, 1).Quo(sdk.NewDec(1000)), // 0.0008
},
},
MintingRewardsDistributionStartEpoch: mintingRewardsDistributionStartEpoch,
}

sumOfWeights := sdk.ZeroDec()
// As a sanity check, ensure developer reward receivers add up to 1.
for _, w := range mintParams.WeightedDeveloperRewardsReceivers {
sumOfWeights = sumOfWeights.Add(w.Weight)
}
require.Equal(t, sdk.OneDec(), sumOfWeights)

// Test setup parameters are not identical with mainnet.
// Therfore, we set them here to the desired mainnet values.
app.MintKeeper.SetParams(ctx, mintParams)
app.MintKeeper.SetLastReductionEpochNum(ctx, 0)
app.MintKeeper.SetMinter(ctx, types.Minter{
EpochProvisions: genesisEpochProvisionsDec,
})

expectedSupplyWithOffset := sdk.NewDec(0)
expectedSupply := sdk.NewDec(developerAccountBalance)

supplyWithOffset := app.BankKeeper.GetSupplyWithOffset(ctx, mintDenom)
require.Equal(t, expectedSupplyWithOffset.TruncateInt64(), supplyWithOffset.Amount.Int64())

supply := app.BankKeeper.GetSupply(ctx, mintDenom)
require.Equal(t, expectedSupply.TruncateInt64(), supply.Amount.Int64())

devRewardsDelta := sdk.ZeroDec()
epochProvisionsDelta := genesisEpochProvisionsDec.Sub(genesisEpochProvisionsDec.TruncateInt().ToDec()).Mul(sdk.NewDec(reductionPeriodInEpochs))

// Actual test for running AfterEpochEnd hook thirdeningEpoch times.
for i := int64(1); i <= reductionPeriodInEpochs; i++ {
developerAccountBalanceBeforeHook := app.BankKeeper.GetBalance(ctx, app.AccountKeeper.GetModuleAddress(types.DeveloperVestingModuleAcctName), mintDenom)

// System undert test.
app.MintKeeper.AfterEpochEnd(ctx, epochIdentifier, i)

// System truncates EpochProvisions because bank takes an Int.
// This causes rounding errors. Let's refer to this source as #1.
//
// Since this is truncated, our total supply calculation at the end will
// be off by reductionPeriodInEpochs * (genesisEpochProvisionsDec - truncatedEpochProvisions)
// Therefore, we store this delta in epochProvisionsDelta to add to the actual supply to compare
// to expected at the end.
truncatedEpochProvisions := genesisEpochProvisionsDec.TruncateInt().ToDec()

// We want supply with offset to exclude unvested developer rewards
// Truncation also happens when subtracting dev rewards.
// Potential source of minor rounding errors #2.
devRewards := truncatedEpochProvisions.Mul(mintParams.DistributionProportions.DeveloperRewards).TruncateInt().ToDec()

// We aim to exclude developer account balance from the supply with offset calculation.
developerAccountBalance := app.BankKeeper.GetBalance(ctx, app.AccountKeeper.GetModuleAddress(types.DeveloperVestingModuleAcctName), mintDenom)

// Make sure developer account balance has decreased by devRewards.
// This check is now failing because of rounding errors.
// To prove that this is the source of errors, we keep accumulating
// the delta and add it to the expected supply validation after the loop.
if !developerAccountBalanceBeforeHook.Amount.ToDec().Sub(devRewards).Equal(developerAccountBalance.Amount.ToDec()) {
expectedDeveloperAccountBalanceAfterHook := developerAccountBalanceBeforeHook.Amount.ToDec().Sub(devRewards)
actualDeveloperAccountBalanceAfterHook := developerAccountBalance.Amount.ToDec()

// This is supposed to be equal but is failing due to the rounding errors from devRewards.
require.NotEqual(t, expectedDeveloperAccountBalanceAfterHook, actualDeveloperAccountBalanceAfterHook)

devRewardsDelta = devRewardsDelta.Add(actualDeveloperAccountBalanceAfterHook.Sub(expectedDeveloperAccountBalanceAfterHook))
}

expectedSupply = expectedSupply.Add(truncatedEpochProvisions).Sub(devRewards)
require.Equal(t, expectedSupply.RoundInt(), app.BankKeeper.GetSupply(ctx, mintDenom).Amount)

expectedSupplyWithOffset = expectedSupply.Sub(developerAccountBalance.Amount.ToDec())
require.Equal(t, expectedSupplyWithOffset.RoundInt(), app.BankKeeper.GetSupplyWithOffset(ctx, mintDenom).Amount)

// Validate that the epoch provisions have not been reduced.
require.Equal(t, mintingRewardsDistributionStartEpoch, app.MintKeeper.GetLastReductionEpochNum(ctx))
require.Equal(t, genesisEpochProvisions, app.MintKeeper.GetMinter(ctx).EpochProvisions.String())
}

// Validate total supply.
// This test check is now failing due to rounding errors.
// Every epoch, we accumulate the rounding delta from every problematic component
// Here, we add the deltas to the actual supply and compare against expected.
//
// expectedTotalProvisionedSupply = 365 * 821917808219.178082191780821917 = 299_999_999_999_999.999999999999999705
expectedTotalProvisionedSupply := sdk.NewDec(reductionPeriodInEpochs).Mul(genesisEpochProvisionsDec)
// actualTotalProvisionedSupply = 299_999_999_997_380 (off by 2619.999999999999999705)
// devRewardsDelta = 2555 (hard to estimate but the source is from truncating dev rewards )
// epochProvisionsDelta = 0.178082191780821917 * 365 = 64.999999999999999705
actualTotalProvisionedSupply := app.BankKeeper.GetSupplyWithOffset(ctx, mintDenom).Amount.ToDec()

// 299_999_999_999_999.999999999999999705 == 299_999_999_997_380 + 2555 + 64.999999999999999705
require.Equal(t, expectedTotalProvisionedSupply, actualTotalProvisionedSupply.Add(devRewardsDelta).Add(epochProvisionsDelta))

// This end of epoch should trigger thirdening. It will utilize the updated
// (reduced) provisions.
app.MintKeeper.AfterEpochEnd(ctx, epochIdentifier, thirdeningEpochNum)

require.Equal(t, thirdeningEpochNum, app.MintKeeper.GetLastReductionEpochNum(ctx))

expectedThirdenedProvisions := mintParams.ReductionFactor.Mul(genesisEpochProvisionsDec)
// Sanity check with the actual value on mainnet.
require.Equal(t, mainnetThirdenedProvisions, expectedThirdenedProvisions.String())
require.Equal(t, expectedThirdenedProvisions, app.MintKeeper.GetMinter(ctx).EpochProvisions)
}

func setupGaugeForLPIncentives(t *testing.T, app *osmoapp.OsmosisApp, ctx sdk.Context) {
addr := sdk.AccAddress([]byte("addr1---------------"))
coins := sdk.Coins{sdk.NewInt64Coin("stake", 10000)}
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