Part 2

Zaros

PerpetualsDEXFoundrySolidity

70,000 USDC

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Submission Details

Severity: high

Valid

Underflow when updating credit delegation will result protocol DoS

glightspeed2

Summary

If vault's credit delegation USD is decreasing, there will be underflow when calculating credit delta. This will result in protocol DoS.

Vulnerability Details

Root Cause Analysis

We have the following code base in Vault._updateCreditDelegations:

UD60x18 creditDeltaUsdX18 = newCreditDelegationUsdX18.sub(previousCreditDelegationUsdX18);

Here, newCreditDelegationUsdX18 and previousCreditDelegationUsdX18 are all UD60x18 type, which means, it will underflow when newCreditDelegationUsdX18 < previousCreditDelegationUsdX18

So when is newCreditDelegationUsdX18 < previousCreditDelegationUsdX18?

Let's look at the following code:

// stores the vault's total credit capacity to be returned

vaultCreditCapacityUsdX18 = getTotalCreditCapacityUsd(self);

// if the vault's credit capacity went to zero or below, we set its credit delegation to that market

// to zero

UD60x18 newCreditDelegationUsdX18 = vaultCreditCapacityUsdX18.gt(SD59x18_ZERO)

? vaultCreditCapacityUsdX18.intoUD60x18().mul(creditDelegationShareX18)

: UD60x18_ZERO;

We can derive that creditDelegationUsd is calculated as the following:

where totalCreditCapacity is calculated as the following:

So newCreditDelegationUsd can be lower than previousCreditDelegationUsd in the following scenarios:

Collateral price is decreased (totalAssetsUsdis decreased)
An LP has redeemed some share (totalAssetsUsdis decreased)
creditDelegationShare is decreased
vaultMarketsRealizedDebtUsd is increased
vaultMarketsUnrealizedDebtUsd is increased
depositedUsdc is decreased

So, it can happen very frequently.

PoC

The following POC demonstrates an underflow when collateral price is dropped:

pragma solidity 0.8.25;

import { CreditDelegationBranch } from "@zaros/market-making/branches/CreditDelegationBranch.sol";

import { VaultRouterBranch } from "@zaros/market-making/branches/VaultRouterBranch.sol";

import { MarketMakingEngineConfigurationBranch } from

"@zaros/market-making/branches/MarketMakingEngineConfigurationBranch.sol";

import { Vault } from "@zaros/market-making/leaves/Vault.sol";

import { Market } from "@zaros/market-making/leaves/Market.sol";

import { CreditDelegation } from "@zaros/market-making/leaves/CreditDelegation.sol";

import { MarketMakingEngineConfiguration } from "@zaros/market-making/leaves/MarketMakingEngineConfiguration.sol";

import { LiveMarkets } from "@zaros/market-making/leaves/LiveMarkets.sol";

import { Collateral } from "@zaros/market-making/leaves/Collateral.sol";

import { UD60x18, ud60x18 } from "@prb-math/UD60x18.sol";

import { SD59x18, sd59x18 } from "@prb-math/SD59x18.sol";

import { Constants } from "@zaros/utils/Constants.sol";

import { SafeCast } from "@openzeppelin/utils/math/SafeCast.sol";

import { EnumerableMap } from "@openzeppelin/utils/structs/EnumerableMap.sol";

import { EnumerableSet } from "@openzeppelin/utils/structs/EnumerableSet.sol";

import { IERC4626 } from "@openzeppelin/token/ERC20/extensions/ERC4626.sol";

import { Errors } from "@zaros/utils/Errors.sol";

import "forge-std/Test.sol";

uint256 constant DEFAULT_DECIMAL = 18;

contract MockVault {

function totalAssets() external pure returns (uint256) {

return 1000 * (10 ** DEFAULT_DECIMAL);

}

contract MockPriceAdapter {

uint256 price = 10 ** DEFAULT_DECIMAL;

function getPrice() external view returns (uint256) {

return price;

}

function setPrice(uint256 newPrice) external {

price = newPrice;

}

contract MockEngine {

function getUnrealizedDebt(uint128) external pure returns (int256) {

return 0;

}

contract MarketMakingConfigurationBranchTest is

CreditDelegationBranch,

VaultRouterBranch,

MarketMakingEngineConfigurationBranch,

Test

{

using Vault for Vault.Data;

using Market for Market.Data;

using CreditDelegation for CreditDelegation.Data;

using Collateral for Collateral.Data;

using SafeCast for uint256;

using EnumerableSet for EnumerableSet.UintSet;

using EnumerableMap for EnumerableMap.AddressToUintMap;

using LiveMarkets for LiveMarkets.Data;

using MarketMakingEngineConfiguration for MarketMakingEngineConfiguration.Data;

uint128 marketId = 1;

uint128 vaultId = 1;

address asset = vm.addr(1);

address usdc = vm.addr(2);

address weth = vm.addr(3);

uint256 collateralAssetAmount = 1000 * (10 ** DEFAULT_DECIMAL);

uint256 creditRatio = 1e18;

MockPriceAdapter priceAdapter;

uint256[] vaultIds = new uint128[](1);

function setUp() external {

MockVault indexToken = new MockVault();

priceAdapter = new MockPriceAdapter();

MockEngine mockEngine = new MockEngine();

MarketMakingEngineConfiguration.Data storage configuration = MarketMakingEngineConfiguration.load();

configuration.usdc = usdc;

Market.Data storage market = Market.load(marketId);

market.engine = address(mockEngine);

uint256[] memory marketIds = new uint256[](1);

marketIds[0] = uint256(marketId);

vaultIds[0] = uint256(vaultId);

market.id = marketId;

LiveMarkets.Data storage liveMarkets = LiveMarkets.load();

liveMarkets.addMarket(marketId);

Collateral.Data storage collateral = Collateral.load(asset);

collateral.priceAdapter = address(priceAdapter);

collateral.creditRatio = creditRatio;

Vault.Data storage vault = Vault.load(vaultId);

vault.id = vaultId;

vault.indexToken = address(indexToken);

vault.collateral.decimals = uint8(DEFAULT_DECIMAL);

vault.collateral.priceAdapter = address(priceAdapter);

vault.collateral.creditRatio = creditRatio;

uint256[] memory _vaultIds = vaultIds;

_connectVaultsAndMarkets(_vaultIds);

}

function testRevertWhenCreditDepositDrop() external {

Market.Data storage market = Market.load(marketId);

_recalculateVaultsCreditCapacity();

CreditDelegation.Data storage creditDelegation = CreditDelegation.load(vaultId, uint256(marketId));

market.depositCredit(asset, ud60x18(collateralAssetAmount));

market.settleCreditDeposit(usdc, ud60x18(300e18));

market.receiveWethReward(weth, ud60x18(0), ud60x18(1e18));

_recalculateVaultsCreditCapacity();

priceAdapter.setPrice(0.9e18); // price dropped from 1 usd to 0.9 usd

vm.expectRevert(stdError.arithmeticError);

_recalculateVaultsCreditCapacity();

}

function _connectVaultsAndMarkets(uint256[] memory _vaultIds) internal {

uint256[] memory marketIds = new uint256[](1);

marketIds[0] = uint256(marketId);

vm.startPrank(address(0));

MarketMakingConfigurationBranchTest(address(this)).connectVaultsAndMarkets(marketIds, _vaultIds);

vm.stopPrank();

}

function _recalculateVaultsCreditCapacity() internal {

MarketMakingConfigurationBranchTest(address(this)).updateMarketCreditDelegations(marketId);

}

Impact

Since most of the protocol's functionalities rely on Vault.recalculateVaultsCreditCapacity, this underflow will bring frequent DoS to the protocol.

For example: LP deposit, withdraw, stake, unstake, weth reward distribution won't be working due to revert in recalculation.

Tools Used

Manual Review, Foundry

Recommendations

SD59x18type should be used for creditDeltaX18 calculation.

Updates

Lead Judging Commences

inallhonesty Lead Judge 6 months ago

Submission Judgement Published

Validated

Assigned finding tags:

Vault::_updateCreditDelegations uses unsigned UD60x18 for credit delegation delta calculation which will underflow on any decrease in credit delegation amount

Prize pool breakdown

Total prize

70,000 USDC

nSLOC

3,258

21 USDC / LOC

High Medium

66,500

Low

3,500

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