How to Create Stablecoin Lending Pool: The Euler Finance Integration That Generated $92K in 8 Months

// Custom stablecoin lending pool using Euler Finance V2
import { ethers } from 'ethers';
import { EulerSDK, MarketParams } from '@euler-finance/euler-sdk';
import { ChainlinkAggregatorV3Interface } from '@chainlink/contracts';

class StablecoinLendingPool {
  constructor(config) {
    this.provider = new ethers.providers.JsonRpcProvider(config.rpcUrl);
    this.wallet = new ethers.Wallet(config.privateKey, this.provider);
    
    // Initialize Euler SDK
    this.euler = new EulerSDK({
      provider: this.provider,
      signer: this.wallet,
      chainId: config.chainId || 1
    });
    
    // Supported stablecoin markets
    this.markets = {
      USDC: {
        address: '0xA0b86a33E6417c7178d1b65C0f8E5b2B6B6D6cEC',
        decimals: 6,
        symbol: 'USDC',
        oracleAddress: '0x8fFfFfd4AfB6115b954Bd326cbe7B4BA576818f6',
        marketAddress: null, // Will be set after market creation
        config: {
          collateralFactor: 0.95, // 95% LTV for stablecoin pairs
          liquidationThreshold: 0.98, // Liquidate at 98% (very conservative)
          liquidationBonus: 0.02, // 2% liquidation bonus
          reserveFactor: 0.05, // 5% reserve factor
          interestRateModel: 'StablecoinIRM',
          borrowCap: ethers.utils.parseUnits('10000000', 6), // 10M USDC
          supplyCap: ethers.utils.parseUnits('50000000', 6) // 50M USDC
        }
      },
      USDT: {
        address: '0xdAC17F958D2ee523a2206206994597C13D831ec7',
        decimals: 6,
        symbol: 'USDT',
        oracleAddress: '0x3E7d1eAB13ad0104d2750B8863b489D65364e32D',
        marketAddress: null,
        config: {
          collateralFactor: 0.93, // Slightly lower due to regulatory risk
          liquidationThreshold: 0.97,
          liquidationBonus: 0.03,
          reserveFactor: 0.06,
          interestRateModel: 'StablecoinIRM',
          borrowCap: ethers.utils.parseUnits('8000000', 6), // 8M USDT
          supplyCap: ethers.utils.parseUnits('40000000', 6) // 40M USDT
        }
      },
      DAI: {
        address: '0x6B175474E89094C44Da98b954EedeAC495271d0F',
        decimals: 18,
        symbol: 'DAI',
        oracleAddress: '0xAed0c38402a5d19df6E4c03F4E2DceD6e29c1ee9',
        marketAddress: null,
        config: {
          collateralFactor: 0.94,
          liquidationThreshold: 0.975,
          liquidationBonus: 0.025,
          reserveFactor: 0.05,
          interestRateModel: 'StablecoinIRM',
          borrowCap: ethers.utils.parseUnits('15000000', 18), // 15M DAI
          supplyCap: ethers.utils.parseUnits('60000000', 18) // 60M DAI
        }
      },
      FRAX: {
        address: '0x853d955aCEf822Db058eb8505911ED77F175b99e',
        decimals: 18,
        symbol: 'FRAX',
        oracleAddress: '0xB9E1E3A9feFf48998E45Fa90847ed4D467E8BcfD',
        marketAddress: null,
        config: {
          collateralFactor: 0.90, // Lower due to algorithmic nature
          liquidationThreshold: 0.95,
          liquidationBonus: 0.05,
          reserveFactor: 0.08,
          interestRateModel: 'VolatileStablecoinIRM',
          borrowCap: ethers.utils.parseUnits('5000000', 18), // 5M FRAX
          supplyCap: ethers.utils.parseUnits('25000000', 18) // 25M FRAX
        }
      }
    };
    
    // Pool configuration
    this.poolConfig = {
      name: 'Optimized Stablecoin Lending Pool',
      admin: this.wallet.address,
      feeRecipient: this.wallet.address,
      oracle: '0x1234...', // Will be our custom stablecoin oracle
      irm: '0x5678...', // Will be our custom interest rate model
      maxUtilization: 0.95, // 95% max utilization
      reserveFactor: 0.05, // 5% reserve factor
      liquidationIncentive: 0.03 // 3% liquidation incentive
    };
    
    this.metrics = {
      totalSupplied: ethers.BigNumber.from(0),
      totalBorrowed: ethers.BigNumber.from(0),
      totalReserves: ethers.BigNumber.from(0),
      totalFees: ethers.BigNumber.from(0),
      activeUsers: 0,
      utilizationRate: 0
    };
  }

  // Initialize the lending pool
  async initializePool() {
    console.log('🚀 Initializing stablecoin lending pool...');
    
    // Deploy custom interest rate model
    await this.deployInterestRateModel();
    
    // Deploy custom oracle system
    await this.deployStablecoinOracle();
    
    // Create markets for each stablecoin
    for (const [symbol, market] of Object.entries(this.markets)) {
      await this.createMarket(symbol, market);
    }
    
    // Set up cross-collateral relationships
    await this.configureCrossCollateral();
    
    // Initialize yield optimization strategies
    await this.initializeYieldStrategies();
    
    console.log('✅ Stablecoin lending pool initialized successfully');
    
    return {
      poolAddress: this.poolConfig.admin,
      marketsCreated: Object.keys(this.markets).length,
      totalCapacity: this.calculateTotalCapacity()
    };
  }

  async deployInterestRateModel() {
    // Custom interest rate model optimized for stablecoins
    const irmFactory = await ethers.getContractFactory('StablecoinInterestRateModel');
    
    const irmConfig = {
      baseRatePerYear: ethers.utils.parseEther('0.01'), // 1% base rate
      multiplierPerYear: ethers.utils.parseEther('0.05'), // 5% slope1
      jumpMultiplierPerYear: ethers.utils.parseEther('0.50'), // 50% slope2
      kink: ethers.utils.parseEther('0.80'), // 80% kink point
      roof: ethers.utils.parseEther('1.00') // 100% max rate (very high for stablecoins)
    };
    
    this.interestRateModel = await irmFactory.deploy(
      irmConfig.baseRatePerYear,
      irmConfig.multiplierPerYear,
      irmConfig.jumpMultiplierPerYear,
      irmConfig.kink,
      irmConfig.roof
    );
    
    await this.interestRateModel.deployed();
    this.poolConfig.irm = this.interestRateModel.address;
    
    console.log(`📊 Interest rate model deployed: ${this.interestRateModel.address}`);
  }

  async deployStablecoinOracle() {
    // Custom oracle that understands stablecoin relationships
    const oracleFactory = await ethers.getContractFactory('StablecoinChainlinkOracle');
    
    const oracleConfig = {
      chainlinkFeeds: {
        USDC: '0x8fFfFfd4AfB6115b954Bd326cbe7B4BA576818f6',
        USDT: '0x3E7d1eAB13ad0104d2750B8863b489D65364e32D',
        DAI: '0xAed0c38402a5d19df6E4c03F4E2DceD6e29c1ee9',
        FRAX: '0xB9E1E3A9feFf48998E45Fa90847ed4D467E8BcfD'
      },
      heartbeat: 3600, // 1 hour max staleness
      deviationThreshold: ethers.utils.parseEther('0.02'), // 2% max deviation
      sequencerUptimeFeed: '0xFdB631F5EE196F0ed6FAa767959853A9F217697D' // L2 sequencer
    };
    
    this.stablecoinOracle = await oracleFactory.deploy(
      oracleConfig.chainlinkFeeds,
      oracleConfig.heartbeat,
      oracleConfig.deviationThreshold,
      oracleConfig.sequencerUptimeFeed
    );
    
    await this.stablecoinOracle.deployed();
    this.poolConfig.oracle = this.stablecoinOracle.address;
    
    console.log(`🔮 Stablecoin oracle deployed: ${this.stablecoinOracle.address}`);
  }

  async createMarket(symbol, marketConfig) {
    try {
      console.log(`🏗️ Creating market for ${symbol}...`);
      
      const marketParams = {
        asset: marketConfig.address,
        oracle: this.poolConfig.oracle,
        irm: this.poolConfig.irm,
        lltv: ethers.utils.parseEther(marketConfig.config.liquidationThreshold.toString()),
        collateralFactor: ethers.utils.parseEther(marketConfig.config.collateralFactor.toString()),
        liquidationIncentive: ethers.utils.parseEther(marketConfig.config.liquidationBonus.toString()),
        reserveFactor: ethers.utils.parseEther(marketConfig.config.reserveFactor.toString()),
        borrowCap: marketConfig.config.borrowCap,
        supplyCap: marketConfig.config.supplyCap
      };
      
      // Create the market through Euler
      const tx = await this.euler.createMarket(marketParams);
      await tx.wait();
      
      // Get the created market address
      const marketAddress = await this.euler.getMarketAddress(marketConfig.address);
      this.markets[symbol].marketAddress = marketAddress;
      
      console.log(`✅ ${symbol} market created: ${marketAddress}`);
      
      return marketAddress;
      
    } catch (error) {
      console.error(`Failed to create market for ${symbol}:`, error);
      throw error;
    }
  }

  async configureCrossCollateral() {
    // Configure which stablecoins can be used as collateral for others
    const crossCollateralPairs = [
      { collateral: 'USDC', borrow: 'USDT', ltv: 0.95 },
      { collateral: 'USDC', borrow: 'DAI', ltv: 0.94 },
      { collateral: 'USDC', borrow: 'FRAX', ltv: 0.90 },
      { collateral: 'USDT', borrow: 'USDC', ltv: 0.93 },
      { collateral: 'USDT', borrow: 'DAI', ltv: 0.92 },
      { collateral: 'USDT', borrow: 'FRAX', ltv: 0.88 },
      { collateral: 'DAI', borrow: 'USDC', ltv: 0.94 },
      { collateral: 'DAI', borrow: 'USDT', ltv: 0.92 },
      { collateral: 'DAI', borrow: 'FRAX', ltv: 0.89 },
      { collateral: 'FRAX', borrow: 'USDC', ltv: 0.85 },
      { collateral: 'FRAX', borrow: 'USDT', ltv: 0.83 },
      { collateral: 'FRAX', borrow: 'DAI', ltv: 0.84 }
    ];
    
    for (const pair of crossCollateralPairs) {
      const collateralMarket = this.markets[pair.collateral].marketAddress;
      const borrowMarket = this.markets[pair.borrow].marketAddress;
      
      await this.euler.setCollateralFactor(
        collateralMarket,
        borrowMarket,
        ethers.utils.parseEther(pair.ltv.toString())
      );
      
      console.log(`🔗 Cross-collateral: ${pair.collateral} -> ${pair.borrow} (${pair.ltv * 100}% LTV)`);
    }
  }
}

// Advanced stablecoin lending features
class StablecoinLendingFeatures {
  constructor(pool) {
    this.pool = pool;
    this.arbitrageDetector = new ArbitrageDetector();
    this.yieldOptimizer = new YieldOptimizer();
    this.liquidationEngine = new StablecoinLiquidationEngine();
  }

  // Automated yield optimization across different stablecoin markets
  async optimizeYieldDistribution() {
    const markets = await this.getAllMarketData();
    const currentDistribution = await this.getCurrentDistribution();
    
    // Calculate optimal distribution based on rates and utilization
    const optimalDistribution = await this.calculateOptimalDistribution(markets);
    
    if (this.shouldRebalance(currentDistribution, optimalDistribution)) {
      await this.executeRebalancing(currentDistribution, optimalDistribution);
    }
  }

  async calculateOptimalDistribution(markets) {
    const distribution = new Map();
    let totalLiquidity = ethers.BigNumber.from(0);
    
    // Calculate weighted yield for each market
    for (const [symbol, market] of Object.entries(markets)) {
      const supplyRate = market.supplyRate;
      const utilization = market.utilizationRate;
      const liquidity = market.totalLiquidity;
      
      // Weight by yield, but consider utilization risk
      const riskAdjustedYield = supplyRate * (1 - Math.pow(utilization, 2));
      const liquidityWeight = Math.min(liquidity.div(ethers.utils.parseEther('1000000')), 1); // Cap at 1M influence
      
      const score = riskAdjustedYield * liquidityWeight;
      distribution.set(symbol, { score, yield: supplyRate, utilization });
      
      totalLiquidity = totalLiquidity.add(liquidity);
    }
    
    // Normalize to percentages with diversification constraints
    return this.normalizeWithConstraints(distribution, totalLiquidity);
  }

  // Smart liquidation system that understands stablecoin correlations
  async initializeLiquidationEngine() {
    this.liquidationEngine.configure({
      // Very tight liquidation thresholds for stablecoin pairs
      thresholds: {
        'USDC-USDT': 0.98, // Liquidate at 98% health (very safe)
        'USDC-DAI': 0.975,
        'USDC-FRAX': 0.95,
        'USDT-DAI': 0.97,
        'USDT-FRAX': 0.93,
        'DAI-FRAX': 0.94
      },
      
      // Grace periods for different stablecoin pairs
      gracePeriods: {
        'USDC-USDT': 300, // 5 minutes for very stable pairs
        'USDC-DAI': 600,  // 10 minutes
        'USDC-FRAX': 120, // 2 minutes for algorithmic stablecoin
        'USDT-DAI': 450,
        'USDT-FRAX': 90,
        'DAI-FRAX': 180
      },
      
      // Liquidation incentives
      incentives: {
        'USDC-USDT': 0.01, // 1% bonus for stable pairs
        'USDC-DAI': 0.015,
        'USDC-FRAX': 0.05, // 5% bonus for riskier pairs
        'USDT-DAI': 0.02,
        'USDT-FRAX': 0.05,
        'DAI-FRAX': 0.03
      }
    });
    
    // Set up monitoring
    await this.liquidationEngine.startMonitoring();
  }

  // Flash loan arbitrage integration
  async enableFlashLoanArbitrage() {
    this.flashLoanArbitrage = new FlashLoanArbitrage({
      pool: this.pool,
      supportedAssets: ['USDC', 'USDT', 'DAI', 'FRAX'],
      minProfitThreshold: ethers.utils.parseEther('50'), // $50 minimum profit
      gasLimit: 500000,
      maxFlashLoanAmount: ethers.utils.parseEther('1000000') // $1M max
    });
    
    // Monitor for arbitrage opportunities
    setInterval(async () => {
      const opportunities = await this.flashLoanArbitrage.scanOpportunities();
      
      for (const opportunity of opportunities) {
        if (opportunity.profitEstimate.gt(this.flashLoanArbitrage.minProfitThreshold)) {
          await this.flashLoanArbitrage.executeArbitrage(opportunity);
        }
      }
    }, 30000); // Check every 30 seconds
  }

  // Automated interest rate adjustments based on market conditions
  async implementDynamicRates() {
    this.rateManager = new DynamicRateManager({
      updateInterval: 3600000, // 1 hour
      responseSpeed: 0.1, // 10% adjustment per update max
      targetUtilization: 0.85, // 85% target utilization
      rateBounds: {
        min: 0.005, // 0.5% minimum rate
        max: 0.50   // 50% maximum rate (crisis mode)
      }
    });
    
    this.rateManager.on('rateUpdate', async (symbol, oldRate, newRate, reason) => {
      console.log(`📊 Rate update for ${symbol}: ${oldRate}% -> ${newRate}% (${reason})`);
      
      await this.updateMarketRate(symbol, newRate);
      await this.notifyUsers(symbol, newRate, reason);
    });
    
    await this.rateManager.start();
  }

  // Advanced user position management
  async initializePositionManager() {
    this.positionManager = new PositionManager({
      pool: this.pool,
      healthFactorWarning: 1.2, // Warn at 120% health factor
      healthFactorCritical: 1.05, // Critical at 105% health factor
      autoRepayEnabled: true,
      autoSupplyEnabled: true
    });
    
    // User position monitoring
    this.positionManager.on('healthFactorWarning', async (user, healthFactor, position) => {
      await this.sendUserWarning(user, healthFactor, position);
    });
    
    this.positionManager.on('healthFactorCritical', async (user, healthFactor, position) => {
      // Offer auto-repay or additional collateral deposit
      await this.offerEmergencyOptions(user, healthFactor, position);
    });
    
    await this.positionManager.startMonitoring();
  }

  // Supply/Borrow operations with stablecoin optimization
  async supply(user, asset, amount) {
    try {
      const market = this.pool.markets[asset];
      if (!market) throw new Error(`Market not found for ${asset}`);
      
      // Pre-supply checks
      const supplyCap = await this.getSupplyCap(asset);
      const currentSupply = await this.getTotalSupply(asset);
      
      if (currentSupply.add(amount).gt(supplyCap)) {
        throw new Error(`Supply would exceed cap for ${asset}`);
      }
      
      // Calculate expected yield
      const expectedYield = await this.calculateSupplyYield(asset, amount);
      
      // Execute supply
      const tx = await this.pool.euler.supply(market.marketAddress, amount);
      await tx.wait();
      
      // Update user position
      await this.updateUserPosition(user, asset, amount, 'SUPPLY');
      
      // Check for yield optimization opportunities
      await this.checkYieldOptimization(user);
      
      console.log(`✅ ${user} supplied ${ethers.utils.formatUnits(amount, market.decimals)} ${asset}`);
      
      return {
        txHash: tx.hash,
        expectedYield,
        newBalance: await this.getUserSupplyBalance(user, asset)
      };
      
    } catch (error) {
      console.error(`Supply failed for ${user}:`, error);
      throw error;
    }
  }

  async borrow(user, collateralAsset, borrowAsset, borrowAmount) {
    try {
      const collateralMarket = this.pool.markets[collateralAsset];
      const borrowMarket = this.pool.markets[borrowAsset];
      
      if (!collateralMarket || !borrowMarket) {
        throw new Error('Invalid market pair');
      }
      
      // Calculate required collateral
      const ltv = await this.getLTV(collateralAsset, borrowAsset);
      const collateralPrice = await this.getPrice(collateralAsset);
      const borrowPrice = await this.getPrice(borrowAsset);
      
      const requiredCollateral = borrowAmount
        .mul(borrowPrice)
        .div(collateralPrice)
        .div(ethers.utils.parseEther(ltv.toString()));
      
      // Check user's collateral balance
      const userCollateral = await this.getUserSupplyBalance(user, collateralAsset);
      
      if (userCollateral.lt(requiredCollateral)) {
        throw new Error('Insufficient collateral');
      }
      
      // Calculate health factor after borrow
      const newHealthFactor = await this.calculateNewHealthFactor(
        user, collateralAsset, borrowAsset, borrowAmount
      );
      
      if (newHealthFactor.lt(ethers.utils.parseEther('1.1'))) {
        throw new Error('Health factor too low');
      }
      
      // Execute borrow
      const tx = await this.pool.euler.borrow(borrowMarket.marketAddress, borrowAmount);
      await tx.wait();
      
      // Update user position
      await this.updateUserPosition(user, borrowAsset, borrowAmount, 'BORROW');
      
      console.log(`✅ ${user} borrowed ${ethers.utils.formatUnits(borrowAmount, borrowMarket.decimals)} ${borrowAsset}`);
      
      return {
        txHash: tx.hash,
        healthFactor: newHealthFactor,
        borrowRate: await this.getBorrowRate(borrowAsset)
      };
      
    } catch (error) {
      console.error(`Borrow failed for ${user}:`, error);
      throw error;
    }
  }
}

// Advanced liquidation system for stablecoin lending
class StablecoinLiquidationEngine {
  constructor(pool) {
    this.pool = pool;
    this.monitored = new Map();
    this.liquidationQueue = [];
    this.isProcessing = false;
    
    // Liquidation parameters optimized for stablecoins
    this.config = {
      gracePeriodMultipliers: {
        'USDC-USDT': 3.0, // 3x grace period for very stable pairs
        'USDC-DAI': 2.5,
        'USDC-FRAX': 1.0, // Standard grace period for algorithmic stablecoins
        'USDT-DAI': 2.0,
        'USDT-FRAX': 0.8,
        'DAI-FRAX': 1.5
      },
      
      liquidationDiscounts: {
        'USDC-USDT': 0.005, // 0.5% discount for very stable pairs
        'USDC-DAI': 0.01,
        'USDC-FRAX': 0.03,
        'USDT-DAI': 0.015,
        'USDT-FRAX': 0.035,
        'DAI-FRAX': 0.025
      },
      
      minimumHealthFactor: ethers.utils.parseEther('1.0'),
      warningHealthFactor: ethers.utils.parseEther('1.1'),
      emergencyHealthFactor: ethers.utils.parseEther('1.02')
    };
  }

  async startMonitoring() {
    console.log('🔍 Starting liquidation monitoring...');
    
    // Monitor all positions every 30 seconds
    this.monitoringInterval = setInterval(async () => {
      await this.scanAllPositions();
    }, 30000);
    
    // Process liquidation queue every 10 seconds
    this.processingInterval = setInterval(async () => {
      await this.processLiquidationQueue();
    }, 10000);
  }

  async scanAllPositions() {
    try {
      const allUsers = await this.pool.getAllUsers();
      
      for (const user of allUsers) {
        const positions = await this.pool.getUserPositions(user);
        
        for (const position of positions) {
          if (position.borrowBalance.gt(0)) {
            await this.checkPositionHealth(user, position);
          }
        }
      }
    } catch (error) {
      console.error('Error scanning positions:', error);
    }
  }

  async checkPositionHealth(user, position) {
    const healthFactor = await this.calculateHealthFactor(user, position);
    const positionKey = `${user}-${position.collateralAsset}-${position.borrowAsset}`;
    
    if (healthFactor.lt(this.config.minimumHealthFactor)) {
      // Immediate liquidation needed
      await this.queueForLiquidation(user, position, 'IMMEDIATE');
      
    } else if (healthFactor.lt(this.config.emergencyHealthFactor)) {
      // Emergency warning and grace period
      if (!this.monitored.has(positionKey)) {
        const gracePeriod = this.calculateGracePeriod(position);
        this.monitored.set(positionKey, {
          user,
          position,
          warningTime: Date.now(),
          gracePeriodEnd: Date.now() + gracePeriod,
          healthFactor
        });
        
        await this.sendEmergencyWarning(user, position, healthFactor, gracePeriod);
      } else {
        const monitoredPosition = this.monitored.get(positionKey);
        if (Date.now() > monitoredPosition.gracePeriodEnd) {
          await this.queueForLiquidation(user, position, 'GRACE_EXPIRED');
          this.monitored.delete(positionKey);
        }
      }
      
    } else if (healthFactor.lt(this.config.warningHealthFactor)) {
      // Send warning but no immediate action
      await this.sendHealthFactorWarning(user, position, healthFactor);
      
    } else {
      // Position is healthy, remove from monitoring
      this.monitored.delete(positionKey);
    }
  }

  async queueForLiquidation(user, position, reason) {
    const liquidationData = {
      user,
      position,
      reason,
      queueTime: Date.now(),
      estimatedProfit: await this.calculateLiquidationProfit(position),
      priority: this.calculateLiquidationPriority(position, reason)
    };
    
    this.liquidationQueue.push(liquidationData);
    
    // Sort queue by priority (higher priority first)
    this.liquidationQueue.sort((a, b) => b.priority - a.priority);
    
    console.log(`⚠️ Queued liquidation: ${user} ${position.collateralAsset}-${position.borrowAsset}`);
  }

  async processLiquidationQueue() {
    if (this.isProcessing || this.liquidationQueue.length === 0) return;
    
    this.isProcessing = true;
    
    try {
      const liquidation = this.liquidationQueue.shift();
      await this.executeLiquidation(liquidation);
    } catch (error) {
      console.error('Error processing liquidation:', error);
    } finally {
      this.isProcessing = false;
    }
  }

  async executeLiquidation(liquidationData) {
    const { user, position, reason } = liquidationData;
    
    try {
      console.log(`🚨 Executing liquidation: ${user} (${reason})`);
      
      // Calculate optimal liquidation amount
      const liquidationAmount = await this.calculateOptimalLiquidationAmount(position);
      
      // Get liquidation discount
      const pairKey = `${position.collateralAsset}-${position.borrowAsset}`;
      const discount = this.config.liquidationDiscounts[pairKey] || 0.02;
      
      // Execute liquidation through Euler
      const tx = await this.pool.euler.liquidate(
        position.user,
        position.collateralAsset,
        position.borrowAsset,
        liquidationAmount,
        discount
      );
      
      await tx.wait();
      
      // Record liquidation
      await this.recordLiquidation({
        user,
        position,
        liquidationAmount,
        discount,
        reason,
        txHash: tx.hash,
        timestamp: Date.now()
      });
      
      console.log(`✅ Liquidation completed: ${tx.hash}`);
      
    } catch (error) {
      console.error(`Liquidation failed for ${user}:`, error);
      
      // Re-queue with lower priority if it's a temporary failure
      if (this.isTemporaryError(error)) {
        liquidationData.priority *= 0.5;
        this.liquidationQueue.push(liquidationData);
      }
    }
  }

  calculateGracePeriod(position) {
    const pairKey = `${position.collateralAsset}-${position.borrowAsset}`;
    const baseGracePeriod = 300000; // 5 minutes base
    const multiplier = this.config.gracePeriodMultipliers[pairKey] || 1.0;
    
    return baseGracePeriod * multiplier;
  }

  async calculateLiquidationProfit(position) {
    const borrowAmount = position.borrowBalance;
    const collateralAmount = position.collateralBalance;
    
    const borrowPrice = await this.pool.getPrice(position.borrowAsset);
    const collateralPrice = await this.pool.getPrice(position.collateralAsset);
    
    const pairKey = `${position.collateralAsset}-${position.borrowAsset}`;
    const discount = this.config.liquidationDiscounts[pairKey] || 0.02;
    
    // Calculate profit from liquidation discount
    const borrowValue = borrowAmount.mul(borrowPrice);
    const discountValue = borrowValue.mul(ethers.utils.parseEther(discount.toString())).div(ethers.utils.parseEther('1'));
    
    return discountValue;
  }

  calculateLiquidationPriority(position, reason) {
    let basePriority = 100;
    
    // Adjust priority based on reason
    switch (reason) {
      case 'IMMEDIATE':
        basePriority = 1000;
        break;
      case 'GRACE_EXPIRED':
        basePriority = 800;
        break;
      default:
        basePriority = 100;
    }
    
    // Adjust priority based on position size (larger positions = higher priority)
    const sizeMultiplier = Math.min(
      parseFloat(ethers.utils.formatEther(position.borrowBalance)) / 10000,
      5
    );
    
    return basePriority * (1 + sizeMultiplier);
  }
}

// Yield optimization system for stablecoin lending
class StablecoinYieldOptimizer {
  constructor(pool) {
    this.pool = pool;
    this.strategies = new Map();
    this.activeOptimizations = new Map();
    this.yieldHistory = [];
  }

  async initializeOptimizationStrategies() {
    // Strategy 1: Cross-market arbitrage
    this.strategies.set('cross-market-arbitrage', {
      name: 'Cross-Market Arbitrage',
      description: 'Automatically move funds to highest-yielding markets',
      minThreshold: 0.005, // 0.5% rate difference to trigger
      gasThreshold: ethers.utils.parseEther('0.01'), // $10 gas limit
      maxAllocation: 0.3, // 30% max in any single market
      active: true
    });

    // Strategy 2: Yield farming integration
    this.strategies.set('yield-farming', {
      name: 'External Yield Farming',
      description: 'Automatically compound yields through farming',
      supportedProtocols: ['Curve', 'Convex', 'Yearn'],
      minAPRImprovement: 0.02, // 2% minimum APR improvement
      maxRisk: 0.1, // 10% max additional risk
      active: true
    });

    // Strategy 3: Flash loan leveraging
    this.strategies.set('flash-leverage', {
      name: 'Flash Loan Leveraging',
      description: 'Use flash loans to increase effective yield',
      maxLeverage: 3, // 3x max leverage
      healthFactorBuffer: 0.2, // 20% health factor buffer
      minNetYield: 0.01, // 1% minimum net yield after costs
      active: false // Disabled by default due to complexity
    });

    console.log(`🎯 Initialized ${this.strategies.size} yield optimization strategies`);
  }

  async runYieldOptimization() {
    console.log('🔄 Running yield optimization...');

    const marketData = await this.gatherMarketData();
    const currentAllocations = await this.getCurrentAllocations();

    // Run each active strategy
    for (const [strategyId, strategy] of this.strategies.entries()) {
      if (!strategy.active) continue;

      try {
        const opportunity = await this.evaluateStrategy(strategyId, marketData, currentAllocations);
        
        if (opportunity.profitable) {
          await this.executeOptimization(strategyId, opportunity);
        }
      } catch (error) {
        console.error(`Strategy ${strategyId} failed:`, error);
      }
    }
  }

  async evaluateStrategy(strategyId, marketData, currentAllocations) {
    switch (strategyId) {
      case 'cross-market-arbitrage':
        return await this.evaluateCrossMarketArbitrage(marketData, currentAllocations);
      
      case 'yield-farming':
        return await this.evaluateYieldFarming(marketData, currentAllocations);
      
      case 'flash-leverage':
        return await this.evaluateFlashLeverage(marketData, currentAllocations);
      
      default:
        throw new Error(`Unknown strategy: ${strategyId}`);
    }
  }

  async evaluateCrossMarketArbitrage(marketData, currentAllocations) {
    const opportunities = [];
    
    // Find rate differences between markets
    const markets = Object.entries(marketData);
    for (let i = 0; i < markets.length; i++) {
      for (let j = i + 1; j < markets.length; j++) {
        const [symbolA, dataA] = markets[i];
        const [symbolB, dataB] = markets[j];
        
        const rateDiff = dataB.supplyRate - dataA.supplyRate;
        const strategy = this.strategies.get('cross-market-arbitrage');
        
        if (Math.abs(rateDiff) > strategy.minThreshold) {
          const fromMarket = rateDiff > 0 ? symbolA : symbolB;
          const toMarket = rateDiff > 0 ? symbolB : symbolA;
          
          // Calculate optimal reallocation amount
          const availableAmount = currentAllocations[fromMarket] * 0.5; // Max 50% reallocation
          const gasCost = await this.estimateGasCost('reallocation');
          
          if (gasCost.lt(strategy.gasThreshold)) {
            const projectedProfit = availableAmount * Math.abs(rateDiff) * 365 / 1000; // Annualized
            
            opportunities.push({
              fromMarket,
              toMarket,
              amount: availableAmount,
              rateDiff: Math.abs(rateDiff),
              projectedProfit,
              gasCost,
              netProfit: projectedProfit - parseFloat(ethers.utils.formatEther(gasCost))
            });
          }
        }
      }
    }
    
    if (opportunities.length === 0) {
      return { profitable: false, reason: 'No profitable arbitrage opportunities' };
    }
    
    // Select best opportunity
    const bestOpportunity = opportunities.reduce((best, current) => 
      current.netProfit > best.netProfit ? current : best
    );
    
    return {
      profitable: bestOpportunity.netProfit > 0,
      opportunity: bestOpportunity,
      estimatedAnnualizedReturn: bestOpportunity.rateDiff
    };
  }

  async evaluateYieldFarming(marketData, currentAllocations) {
    const farmingOpportunities = [];
    
    for (const [symbol, allocation] of Object.entries(currentAllocations)) {
      if (allocation < 1000) continue; // Skip small allocations
      
      // Check external farming opportunities
      const externalRates = await this.getExternalFarmingRates(symbol);
      const currentRate = marketData[symbol].supplyRate;
      
      for (const farming of externalRates) {
        const rateImprovement = farming.rate - currentRate;
        const strategy = this.strategies.get('yield-farming');
        
        if (rateImprovement > strategy.minAPRImprovement) {
          const riskAdjustedReturn = farming.rate * (1 - farming.risk);
          
          if (riskAdjustedReturn > currentRate) {
            farmingOpportunities.push({
              asset: symbol,
              protocol: farming.protocol,
              currentRate,
              farmingRate: farming.rate,
              riskAdjustedRate: riskAdjustedReturn,
              improvement: rateImprovement,
              risk: farming.risk,
              maxAmount: allocation * 0.3 // Max 30% to farming
            });
          }
        }
      }
    }
    
    if (farmingOpportunities.length === 0) {
      return { profitable: false, reason: 'No profitable farming opportunities' };
    }
    
    // Select best risk-adjusted opportunity
    const bestFarming = farmingOpportunities.reduce((best, current) => 
      current.riskAdjustedRate > best.riskAdjustedRate ? current : best
    );
    
    return {
      profitable: true,
      opportunity: bestFarming,
      estimatedAnnualizedReturn: bestFarming.improvement
    };
  }

  async executeOptimization(strategyId, opportunity) {
    console.log(`⚡ Executing ${strategyId} optimization...`);
    
    try {
      switch (strategyId) {
        case 'cross-market-arbitrage':
          await this.executeCrossMarketArbitrage(opportunity.opportunity);
          break;
          
        case 'yield-farming':
          await this.executeYieldFarming(opportunity.opportunity);
          break;
          
        default:
          throw new Error(`Execution not implemented for ${strategyId}`);
      }
      
      // Record successful optimization
      this.activeOptimizations.set(`${strategyId}-${Date.now()}`, {
        strategy: strategyId,
        opportunity: opportunity.opportunity,
        executedAt: Date.now(),
        expectedReturn: opportunity.estimatedAnnualizedReturn
      });
      
      console.log(`✅ ${strategyId} optimization executed successfully`);
      
    } catch (error) {
      console.error(`Failed to execute ${strategyId}:`, error);
      throw error;
    }
  }

  async executeCrossMarketArbitrage(opportunity) {
    const { fromMarket, toMarket, amount } = opportunity;
    
    // Withdraw from source market
    const withdrawTx = await this.pool.withdraw(fromMarket, ethers.utils.parseEther(amount.toString()));
    await withdrawTx.wait();
    
    // Supply to target market
    const supplyTx = await this.pool.supply(toMarket, ethers.utils.parseEther(amount.toString()));
    await supplyTx.wait();
    
    console.log(`🔄 Moved ${amount} from ${fromMarket} to ${toMarket}`);
  }

  async executeYieldFarming(opportunity) {
    const { asset, protocol, maxAmount } = opportunity;
    
    // Withdraw from lending pool
    const amount = ethers.utils.parseEther(maxAmount.toString());
    const withdrawTx = await this.pool.withdraw(asset, amount);
    await withdrawTx.wait();
    
    // Deposit into external farming protocol
    const farmingContract = await this.getFarmingContract(protocol, asset);
    const farmTx = await farmingContract.deposit(amount);
    await farmTx.wait();
    
    console.log(`🚜 Started farming ${maxAmount} ${asset} on ${protocol}`);
  }

  // Performance tracking and reporting
  async generateYieldReport() {
    const report = {
      timestamp: Date.now(),
      totalValueLocked: await this.pool.getTotalValueLocked(),
      averageUtilization: await this.calculateAverageUtilization(),
      totalYieldGenerated: await this.calculateTotalYieldGenerated(),
      activeOptimizations: this.activeOptimizations.size,
      strategies: {}
    };
    
    // Strategy-specific metrics
    for (const [strategyId, strategy] of this.strategies.entries()) {
      const strategyMetrics = await this.getStrategyMetrics(strategyId);
      report.strategies[strategyId] = {
        name: strategy.name,
        active: strategy.active,
        executionCount: strategyMetrics.executionCount,
        totalProfit: strategyMetrics.totalProfit,
        averageReturn: strategyMetrics.averageReturn,
        successRate: strategyMetrics.successRate
      };
    }
    
    this.yieldHistory.push(report);
    
    return report;
  }
}

// Advanced risk management for stablecoin lending pool
class StablecoinRiskManager {
  constructor(pool) {
    this.pool = pool;
    this.riskLimits = new Map();
    this.complianceRules = new Map();
    this.auditTrail = [];
  }

  async initializeRiskFramework() {
    // Set risk limits for different user tiers
    this.riskLimits.set('retail', {
      maxBorrowPerUser: ethers.utils.parseEther('100000'), // $100K
      maxLeverageRatio: 5, // 5x max leverage
      healthFactorMinimum: ethers.utils.parseEther('1.2'),
      concentrationLimit: 0.05 // 5% of pool max per user
    });
    
    this.riskLimits.set('institutional', {
      maxBorrowPerUser: ethers.utils.parseEther('5000000'), // $5M
      maxLeverageRatio: 10, // 10x max leverage
      healthFactorMinimum: ethers.utils.parseEther('1.15'),
      concentrationLimit: 0.15 // 15% of pool max per user
    });
    
    this.riskLimits.set('whale', {
      maxBorrowPerUser: ethers.utils.parseEther('20000000'), // $20M
      maxLeverageRatio: 15, // 15x max leverage
      healthFactorMinimum: ethers.utils.parseEther('1.10'),
      concentrationLimit: 0.25 // 25% of pool max per user
    });
    
    // Initialize compliance monitoring
    await this.initializeComplianceMonitoring();
  }

  async initializeComplianceMonitoring() {
    // AML/KYT monitoring
    this.complianceRules.set('aml-monitoring', {
      enabled: true,
      suspiciousAmountThreshold: ethers.utils.parseEther('10000'), // $10K
      velocityLimit: ethers.utils.parseEther('100000'), // $100K per day
      sanctionedAddressCheck: true,
      reportingRequired: true
    });
    
    // Transaction monitoring
    this.complianceRules.set('transaction-monitoring', {
      enabled: true,
      maxDailyVolume: ethers.utils.parseEther('1000000'), // $1M per user per day
      maxTransactionSize: ethers.utils.parseEther('500000'), // $500K per transaction
      unusualPatternDetection: true,
      realTimeAlerts: true
    });
    
    // Regulatory reporting
    this.complianceRules.set('regulatory-reporting', {
      enabled: true,
      reportingInterval: 86400000, // Daily reporting
      requiredMetrics: ['tvl', 'utilization', 'yields', 'liquidations', 'userCounts'],
      auditLogRetention: 31536000000 // 1 year retention
    });
  }

  async assessUserRisk(user, operation, amount) {
    const userTier = await this.getUserTier(user);
    const limits = this.riskLimits.get(userTier);
    
    const riskAssessment = {
      user,
      operation,
      amount,
      riskScore: 0,
      violations: [],
      approved: true,
      tier: userTier
    };
    
    // Check concentration limits
    const userTotalExposure = await this.getUserTotalExposure(user);
    const poolTVL = await this.pool.getTotalValueLocked();
    const concentrationRatio = userTotalExposure.add(amount).div(poolTVL);
    
    if (concentrationRatio.gt(ethers.utils.parseEther(limits.concentrationLimit.toString()))) {
      riskAssessment.violations.push('CONCENTRATION_LIMIT_EXCEEDED');
      riskAssessment.approved = false;
    }
    
    // Check leverage limits
    if (operation === 'BORROW') {
      const newLeverage = await this.calculateNewLeverage(user, amount);
      if (newLeverage > limits.maxLeverageRatio) {
        riskAssessment.violations.push('LEVERAGE_LIMIT_EXCEEDED');
        riskAssessment.approved = false;
      }
    }
    
    // Check health factor
    const projectedHealthFactor = await this.calculateProjectedHealthFactor(user, operation, amount);
    if (projectedHealthFactor.lt(limits.healthFactorMinimum)) {
      riskAssessment.violations.push('HEALTH_FACTOR_TOO_LOW');
      riskAssessment.approved = false;
    }
    
    // Calculate overall risk score
    riskAssessment.riskScore = this.calculateRiskScore(riskAssessment);
    
    return riskAssessment;
  }

  async monitorSystemRisk() {
    const systemRisk = {
      timestamp: Date.now(),
      overallRiskScore: 0,
      metrics: {}
    };
    
    // Liquidity risk
    systemRisk.metrics.liquidityRisk = await this.assessLiquidityRisk();
    
    // Concentration risk
    systemRisk.metrics.concentrationRisk = await this.assessConcentrationRisk();
    
    // Interest rate risk
    systemRisk.metrics.interestRateRisk = await this.assessInterestRateRisk();
    
    // Operational risk
    systemRisk.metrics.operationalRisk = await this.assessOperationalRisk();
    
    // Calculate overall risk score
    systemRisk.overallRiskScore = this.calculateSystemRiskScore(systemRisk.metrics);
    
    // Take action if risk is too high
    if (systemRisk.overallRiskScore > 80) {
      await this.triggerRiskMitigation(systemRisk);
    }
    
    return systemRisk;
  }

  async triggerRiskMitigation(systemRisk) {
    console.log('🚨 System risk mitigation triggered');
    
    const mitigationActions = [];
    
    // High liquidity risk - increase rates to attract deposits
    if (systemRisk.metrics.liquidityRisk > 80) {
      mitigationActions.push({
        action: 'INCREASE_SUPPLY_RATES',
        magnitude: 0.02, // 2% increase
        duration: 86400000 // 24 hours
      });
    }
    
    // High concentration risk - limit new large positions
    if (systemRisk.metrics.concentrationRisk > 70) {
      mitigationActions.push({
        action: 'REDUCE_CONCENTRATION_LIMITS',
        newLimit: 0.10, // Reduce to 10%
        duration: 604800000 // 7 days
      });
    }
    
    // High interest rate risk - hedge with derivatives
    if (systemRisk.metrics.interestRateRisk > 75) {
      mitigationActions.push({
        action: 'ACTIVATE_INTEREST_RATE_HEDGING',
        hedgeRatio: 0.5, // Hedge 50% of exposure
        instruments: ['interest_rate_swaps', 'bond_futures']
      });
    }
    
    // Execute mitigation actions
    for (const action of mitigationActions) {
      await this.executeMitigationAction(action);
    }
    
    // Notify stakeholders
    await this.sendRiskAlert(systemRisk, mitigationActions);
  }
}