Merge pull request #222 from morpho-labs/feat/compound-1

feat: compound interest

src/Blue.sol

@@ -378,7 +378,7 @@ contract Blue is IBlue {
 
         if (marketTotalBorrow != 0) {
             uint256 borrowRate = IIrm(market.irm).borrowRate(market);
-            uint256 accruedInterests = marketTotalBorrow.mulWadDown(borrowRate * elapsed);
+            uint256 accruedInterests = marketTotalBorrow.mulWadDown(borrowRate.wTaylorCompounded(elapsed));
             totalBorrow[id] = marketTotalBorrow + accruedInterests;
             totalSupply[id] += accruedInterests;
 

src/libraries/FixedPointMathLib.sol

@@ -29,6 +29,16 @@ library FixedPointMathLib {
         return mulDivUp(x, WAD, y); // Equivalent to (x * WAD) / y rounded up.
     }
 
+    /// @dev The sum of the last three terms in a four term taylor series expansion
+    ///      to approximate a compound interest rate: (1 + x)^n - 1.
+    function wTaylorCompounded(uint256 x, uint256 n) internal pure returns (uint256) {
+        uint256 firstTerm = x * n;
+        uint256 secondTerm = mulWadDown(firstTerm, x * zeroFloorSub(n, 1)) / 2;
+        uint256 thirdTerm = mulWadDown(secondTerm, x * zeroFloorSub(n, 2)) / 3;
+
+        return firstTerm + secondTerm + thirdTerm;
+    }
+
     /*//////////////////////////////////////////////////////////////
                     LOW LEVEL FIXED POINT OPERATIONS
     //////////////////////////////////////////////////////////////*/
@@ -55,4 +65,15 @@ library FixedPointMathLib {
             z := add(gt(mod(mul(x, y), denominator), 0), div(mul(x, y), denominator))
         }
     }
+
+    /*//////////////////////////////////////////////////////////////
+                    INTEGER OPERATIONS
+    //////////////////////////////////////////////////////////////*/
+
+    /// @dev Returns max(x - y, 0).
+    function zeroFloorSub(uint256 x, uint256 y) internal pure returns (uint256 z) {
+        assembly {
+            z := mul(gt(x, y), sub(x, y))
+        }
+    }
 }

test/forge/Math.t.sol

@@ -0,0 +1,31 @@
+// SPDX-License-Identifier: UNLICENSED
+pragma solidity ^0.8.0;
+
+import "forge-std/Test.sol";
+
+import "src/libraries/FixedPointMathLib.sol";
+
+contract MathTest is Test {
+    using FixedPointMathLib for uint256;
+
+    function testWTaylorCompounded(uint256 rate, uint256 timeElapsed) public {
+        // Assume rate is less than a ~500% APY. (~180% APR)
+        vm.assume(rate < (FixedPointMathLib.WAD / 20_000_000) && timeElapsed < 365 days);
+        uint256 result = rate.wTaylorCompounded(timeElapsed) + FixedPointMathLib.WAD;
+        uint256 toCompare = wPow(FixedPointMathLib.WAD + rate, timeElapsed);
+        assertLe(result, toCompare, "rate should be less than the compounded rate");
+        assertGe(
+            result, FixedPointMathLib.WAD + timeElapsed * rate, "rate should be greater than the simple interest rate"
+        );
+        assertLe((toCompare - result) * 100_00 / toCompare, 8_00, "The error should be less than or equal to 8%");
+    }
+
+    // Exponentiation by squaring with rounding up.
+    function wPow(uint256 x, uint256 n) private pure returns (uint256 z) {
+        z = FixedPointMathLib.WAD;
+        for (; n != 0; n /= 2) {
+            z = n % 2 != 0 ? z.mulWadUp(x) : z;
+            x = x.mulWadUp(x);
+        }
+    }
+}