First Flight #21: KittyFi

Summary

The pool address has exclusive control over minting and burning tokens. If compromised, an attacker could:

• Mint Unlimited Tokens: Inflate the token supply, devaluing the currency.

• Burn Tokens Arbitrarily: Destroy tokens from any address, potentially causing loss of funds.

Vulnerability Details

1. Unlimited Minting:

   • Description: The pool address can call the mint function to create an unlimited number of tokens.

   • Impact:

     • Inflation: Excessive token supply can lead to significant devaluation.

     • Market Trust: Investors and users may lose confidence in the token, leading to market withdrawal.

2. Arbitrary Burning:

   • Description: The pool address can call the burn function to destroy tokens from any address.

   • Impact:

     • Loss of Funds: Users could lose their tokens without consent, leading to financial loss.

     • Market Manipulation: The attacker could manipulate the token's supply and demand, causing price instability.

3. Single Point of Failure:

   • Description: The pool address is the sole entity with minting and burning privileges.

   • Impact:

     • Centralized Risk: If the pool address is compromised, the attacker gains full control over token supply management.

4. Lack of Upgradability:

   • Description: The current implementation does not allow for updating the pool address.

   • Impact:

     • Permanent Risk: If the pool address is compromised, there is no way to mitigate the risk without redeploying

Impact

1. Token Inflation:

   • Unlimited Minting: An attacker could mint an unlimited number of tokens, leading to:

     • Devaluation: The token's value could plummet due to oversupply.

     • Loss of Trust: Investors and users may lose confidence in the token.

2. Token Destruction:

   • Arbitrary Burning: An attacker could burn tokens from any address, causing:

     • Loss of Funds: Users could lose their tokens without consent.

     • Market Manipulation: The attacker could manipulate the token's supply and demand dynamics.

3. Economic Disruption:

   • Market Impact: Sudden changes in token supply can lead to market volatility.

   • Liquidity Issues: Excessive minting or burning could affect liquidity pools, causing slippage and price instability.

4. Reputation Damage:

   • Loss of Credibility: The project could suffer reputational damage, making it difficult to attract future investors or partners.

   • Regulatory Scrutiny: Authorities might scrutinize the project more closely, potentially leading to legal challenges.

Tools Used

Audit Wizard

Read the code

PoC

The following tests show how only the KittyPool address can mint or burn.

Recommendations

• Multi-Signature Wallet: Use a multi-signature wallet for the pool address to reduce the risk of a single point of failure.

• Timelocks: Implement timelocks on critical functions to delay actions, allowing time to respond to potential compromises.

• Regular Audits: Conduct regular security audits of the KittyPool contract.

• Upgradability: Consider making the pool address upgradable with strict access controls.

Pros and Cons of Making the Pool Address Updatable:

Pros:

1. Flexibility:

   • Address Replacement: Ability to replace the pool address if it is compromised or needs upgrading.

   • Adaptability: Adjust to changing requirements or improvements in security practices.

2. Risk Mitigation:

   • Compromise Recovery: Quickly switch to a new, secure pool address if the current one is compromised.

   • Maintenance: Facilitate updates and maintenance without redeploying the entire contract.

Cons:

1. Security Risks:

   • Potential Exploits: Introducing a function to update the pool address could be exploited if not properly secured.

   • Access Control: Ensuring only authorized entities can update the address is critical.

2. Complexity:

   • Additional Code: Increases the complexity of the contract, which could introduce new bugs or vulnerabilities.

   • Management: Requires careful management and monitoring to prevent unauthorized changes.

Implementation Considerations:

1. Access Control:

   • Owner or Multi-Sig: Restrict the update function to a contract owner or a multi-signature wallet.

   • Timelocks: Implement timelocks to delay the update, allowing time to react to potential unauthorized changes.

2. Event Logging:

   • Transparency: Emit events when the pool address is updated to ensure transparency and traceability.

3. Audits:

   • Regular Audits: Conduct regular security audits to ensure the update mechanism is secure.

Example Implementation using OZ Ownable: