Part 2

Summary

The Zaros Perpetuals DEX lacks a pause and unpause mechanism, which is crucial security feature for any DEFi protocol. This absence exposes the protocol to significant risks in case of an emergency, exploit , or unexpected market event.

Vulnerability Details

A pause mechanism allows the protocol's admin (or governance) to halt trading, deposits, liquidations, and other critical functions in case of

1. A major security exploit: (e.g., an oracle manipulation attack or smart contract vulnerability).

2. Sequencer downtime which is taking longer

3. A chainlink failure or sequencer downtime on Arbitrum, preventing inaccurate prices incorrect liquidation and unfair liquidations

Impact

• Smart Contract exploit

• Oracle manipulation attacks

• Liquidity drain risks

• Unexpected market crashes

Tools Used

Manual Review

Recommendations

Zaros developers should immediately implement a pause function in both:

1. The perpetuals Trading Engine

2. The Market Making Engine