Alchemix Transmuter

Summary

The _swapUnderlyingToAsset function does not validate the swap price beyond a basic minOut parameter check. This could lead to swaps being executed at unfavorable rates, resulting in economic losses for the contract. Additionally, the reliance on external inputs like _path and minOut without further validation increases the risk of inefficiencies and manipulation.

Vulnerability Details

The function allows swapping WETH for alETH using the Ramses Router, but it does not verify the swap price against an on-chain oracle or any reliable price source. Instead, it relies solely on the minOut parameter provided by the caller. This lack of price validation introduces the following risks:

• Economic Inefficiency: Swaps may occur at suboptimal rates, especially in volatile markets.

• Manipulation: A malicious or careless keeper could set an excessively low minOut value, leading to poor trade execution.

• Market Vulnerability: During periods of low liquidity or high volatility, the function may execute swaps that deviate significantly from the intended value.

Impact

Severity: Medium

• Likelihood: High

• Impact Level:

  • Medium in stable market conditions due to minor inefficiencies or slippage.

  • High in volatile markets or during malicious exploitation, leading to substantial economic losses.

Tools Used

Manual Review

PoC

Exploiting Insufficient Swap Price Validation

1. Setup:

   • The contract interacts with the Ramses Router to swap WETH for alETH.

   • The _swapUnderlyingToAsset function requires only that minOut > _amount, but it does not validate if the swap rate is favorable or above 1:1.

2. Attack Steps:

   • The attacker observes the function logic and determines that no oracle or price check is in place.

   • They manipulate the market or set up a malicious path that results in a very unfavorable swap rate (e.g., receiving only 0.5 alETH per WETH swapped).

   • They invoke the _swapUnderlyingToAsset function with:

     • _amount: The WETH they want to swap (e.g., 100 WETH).

     • minOut: A value marginally greater than _amount (e.g., 100.1 alETH).

     • _path: A custom malicious swap path leading to poor rates or involving malicious routers/contracts.

3. Exploit Outcome:

   • The function executes the swap, and the attacker receives 100.1 alETH at a very unfavorable rate (e.g., they could have received 150 alETH at market rates).

   • The contract loses value due to the suboptimal swap, effectively transferring the value difference to the attacker.

PoC Implementation:

Below is a simplified script demonstrating how an attacker might execute the exploit:

Recommendations

** Price Validation**:

• Implement a check to validate that the effective swap price is better than or equal to a predefined threshold (e.g., 1:1 or using an on-chain oracle).

• Example:

  uint256 oraclePrice = getOraclePrice(); // Fetch price from a trusted source

  require((minOut * 1e18) / _amount >= oraclePrice, "Swap price below threshold");

  ​

2. Slippage Control:

   • Ensure that minOut represents a realistic and fair minimum amount for the trade based on the current market conditions.

   • Use a capped percentage difference from the oracle price to set acceptable slippage levels.

3. Path Validation:

   • Whitelist trusted swap paths and ensure that _path aligns with known safe routes.

4. Monitoring and Alerts:

   • Implement monitoring to detect and alert for abnormal swap behavior or execution prices.