First Flight #21: KittyFi

Summary

The KittyVault smart contract heavily relies on several external contracts, including IAavePool, AggregatorV3Interface, and others. Any bugs, vulnerabilities, or malicious actions in these external contracts can directly impact the security and functionality of the KittyVault contract. Therefore, it is crucial to ensure that these external contracts are thoroughly audited and come from trusted, reputable sources. Trust assumptions on these external dependencies introduce high-severity risks that could lead to significant financial losses if not properly managed and secured.

Vulnerability Details

The KittyVault contract relies heavily on several external contracts and interfaces, such as IAavePool, AggregatorV3Interface, and ERC20 tokens via IERC20. These dependencies introduce multiple points of potential failure, as the security and reliability of the KittyVault contract are directly tied to the security of these external contracts.

Impact

1. Financial Loss: If any of these external contracts have vulnerabilities, those vulnerabilities can propagate to the KittyVault contract, leading to potential financial losses for users.

2. Incorrect Data: If the price oracles (AggregatorV3Interface) are compromised or provide incorrect data, it can lead to incorrect collateral valuations and financial calculations, impacting users' balances and the overall operation of the contract.

3. Functionality Disruption: If the external contracts are updated or deprecated, or if they change their behavior unexpectedly, it could disrupt the functionality of the KittyVault contract.

Tools Used

Manual review, Foundry

Recommendations

1. Audits: Ensure that all external contracts and dependencies are thoroughly audited by reputable security firms. Prefer widely used and well-audited contracts from established projects.

2. Fallback Mechanisms: Implement fallback mechanisms to handle cases where external contracts behave unexpectedly. For example, set limits or revert transactions if the price data from oracles seems out of expected ranges.

3. Contract Versioning: Be cautious about updates to external contracts. Monitor changes in their interfaces and functionalities, and update the KittyVault contract accordingly.

4. Diversification: Where possible, diversify dependencies. For example, use multiple oracles for price feeds and implement logic to cross-check and validate the data.

5. Testing: Regularly test the contract with mocks and stubs of the external contracts to ensure that changes in external dependencies do not introduce vulnerabilities.