Aave DIVA Wrapper

Summary
The AaveDIVAWrapper contract incorrectly handles tokens that take fees on transfer (fee-on-transfer tokens) by minting more wTokens than the actual received collateral amount. This can lead to a mismatch between the wrapped token supply and the actual collateral backing, potentially allowing malicious users to drain funds from the protocol.

Vulnerability Details
In the _handleTokenOperations function, the contract mints wTokens based on the input amount rather than the actual received amount after transfer fees. For tokens that deduct fees on transfer, this creates a discrepancy between:

1. The amount of collateral actually received and supplied to Aave

2. The amount of wTokens minted

   function _handleTokenOperations(address _collateralToken, uint256 _collateralAmount, address _wToken) private {
   // Transfers collateral token - if token has 5% fee, only 95 tokens are received
   IERC20Metadata(_collateralToken).safeTransferFrom(msg.sender, address(this), _collateralAmount);

   // Supplies the received amount (95 tokens) to Aave

   IAave(_aaveV3Pool).supply(

   _collateralToken,

   _collateralAmount, // Using original amount instead of actual received

   address(this),

   0

   );

   ​

   // Mints wTokens based on original amount (100) instead of received amount (95)

   IWToken(_wToken).mint(address(this), _collateralAmount);

   }

Impact
Users can receive more wTokens than the actual collateral backing them

• This breaks the 1:1 peg between wTokens and underlying collateral

• The protocol becomes undercollateralized

• Malicious users can exploit this to drain funds from the protocol

Tools Used
// SPDX-License-Identifier: MIT
pragma solidity 0.8.26;

import "forge-std/Test.sol";
import "../src/AaveDIVAWrapper.sol";
import "../src/mocks/MockFeeToken.sol";
import "../src/mocks/MockAave.sol";
import "../src/mocks/MockDIVA.sol";

contract AaveDIVAWrapperTest is Test {
AaveDIVAWrapper public wrapper;
MockFeeToken public feeToken;
MockAave public aave;
MockDIVA public diva;
address public owner;
address public attacker;

}

Manual review

• Foundry for PoC development

Recommendations

Modify the _handleTokenOperations function to use the actual received amount:

function _handleTokenOperations(address _collateralToken, uint256 _collateralAmount, address _wToken) private {
// Record balance before transfer
uint256 balanceBefore = IERC20Metadata(_collateralToken).balanceOf(address(this));

}

Consider maintaining a whitelist of approved collateral tokens

• Add explicit checks that token balances match expected amounts

• Add documentation warning about fee-on-transfer tokens