TempleGold

Summary

The DAO cannot curtail circulating token surplus since they cannot burn tokens.

Vulnerability Details

Usually, tokens to be burnt should be sent to address(0)where it can neither be accessed nor spent.

In the instant case, there is a check against specifying an address(0)as the burning address.

See the function below:

Now, another argument is that "well, tokens to be burnt can be sent to another address other than a zero address."

Note that this leads to further risks, possibly one of centralization.

Impact

Once there is no way to burn tokens, the economy of the token will fall flat because supply can be more than demand.

Economically, this will affect the price of the tokens and make it drop drastically -- even to 0!

Here is an economy PoC

• 2000 tokens are minted in total and they all are in circulation at $1 each

• holders want to sell and offers lower price such as $0.7 for quicker purchase

• other holders compromise selling price to stay liquid

Now, coming to the DAO:

• the DAO has 700 of the tokens

• the DAO cannot burn 700 tokens in circulation to create scarcity

• so the price keeps dropping

Tools Used

Manual review.

Recommendations

Make it possible to transfer to a zero address. While users will not need this, the DAO will need it to create market equilibrium!