Part 2

The _handleWethRewardDistribution() function misallocates WETH rewards due to precision loss when performing fixed-point arithmetic using PRB-Math’s UD60x18. The calculation:

assumes that receivedProtocolWethRewardX18 + receivedVaultsWethRewardX18 will always sum exactly to receivedWethX18, but due to rounding errors inherent in fixed-point arithmetic, leftover may be a small nonzero value. The contract then arbitrarily assigns this remainder to receivedVaultsWethRewardX18, favoring vault rewards over protocol rewards in an unpredictable manner. Over multiple iterations, this rounding discrepancy accumulates, leading to persistent misallocation of WETH fees.

Impact

Incorrect WETH distribution results in protocol fee recipients and vaults receiving slightly more or less than their intended share, creating an unfair reward system and potentially leading to financial discrepancies over time.

Mitigation

To ensure all WETH is accounted for correctly, first compute the vault reward, then allocate the exact remaining WETH to protocol rewards: