Core Contracts

Summary

Whenever a user repays their debt, the corresponding debt tokens are burned. However, there is incorrect accounting during the burning process, leading to discrepancies in total supply calculations. This miscalculation could result in future protocol failures.

Vulnerability Details

• In the DebtToken::burn() function, the contract first calculates the scaled balance:

  uint256 userBalance = balanceOf(from);

  The balance is determined as (balance * reserve.usageIndex) / 1e27.

• If amount > userBalance, the function caps amount to userBalance before proceeding:

  if(amount > userBalance){

  amount = userBalance;

  }

• The scaled amount is then computed and used for burning:

  uint256 amountScaled = amount.rayDiv(index);

  if (amountScaled == 0) revert InvalidAmount();

  _burn(from, amount.toUint128());

• The issue arises because balanceOf() considers the balanceIncrease amount, which represents accrued interest or changes in debt due to index adjustments. However, these additional balanceIncrease tokens are never explicitly minted. The contract then attempts to burn tokens that were never created, leading to incorrect supply calculations.

Impact

• The protocol's total supply tracking becomes inconsistent, as it burns tokens that do not exist on-chain.

• Future functionalities relying on accurate debt token supply (e.g., interest rate calculations, liquidation mechanics) may break.

• Users could face unexpected accounting issues, affecting borrowing and repayment mechanisms.

Tools Used

• Manual code review

Recommendations

• First Mint those balanceIncrease amount of tokens then burn total amount of tokens