The Standard

Summary

Tokens whose code and logic can be changed in the future can break the protocol and result to locked user funds and or internal accounting issues.

Vulnerability Details

For a token like TUSD, which has a proxy and implementation contract, the token can be upgraded to a rebase/fee-on-transfer/pausable token that breaks protocol. Or the token decimals can change and it will break the distributeAssets function of the LiquidationPool contract.

Impact

The standard code logic such liquidation may break in the future for such tokens and block user funds or block users from staking or liquidating.

Tools

Manual Review

Recommendation

1. Consider introducing a logic that will freeze interactions with such tokens when the upgrade is detected. (e.g. the TUSD adapter used by MakerDAO).

2. Have a token whitelist which does not allow such tokens to be used as collateral or loan tokens.

3. Disallow tokens with a proxy