Core Contracts

Regnum Aurum Acquisition Corp

HardhatReal World AssetsNFT

77,280 USDC

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Submission Details

Severity: medium

Invalid

No Incentive to repay on behalf of someone else

shuernchua

Summary

Repaying on behalf of someone else brings no benefit to the repayer, even when positions are underwater.

Vulnerability Details

When users accumulate bad debt, they have two options. 1) Repay their debt themselves or 2) Have someone repay their debt on their behalf.
However, since there is no incentive for any user to pay off loans that have gone underwater, the protocol will continue accumulate bad debt.

Impact

Lack of incentive to repay on behalf of someone else or to receive someone else's collateral when their position is underwater will cause the protocol to accrue bad debt.

Tools Used

Manual Review

PoC

Below is the Foundry PoC:

// SPDX-License-Identifier: MIT

pragma solidity ^0.8.19;

import "forge-std/Test.sol";

import {IERC20, ERC20} from "@openzeppelin/contracts/token/ERC20/ERC20.sol";

import "@openzeppelin/contracts/token/ERC20/utils/SafeERC20.sol";

import "@openzeppelin/contracts/token/ERC20/IERC20.sol";

import "@openzeppelin/contracts/utils/math/SafeCast.sol";

import "../../contracts/libraries/math/PercentageMath.sol";

import "../../contracts/libraries/math/WadRayMath.sol";

import {BaseSetup} from "./BaseSetup.t.sol";

import "../../contracts/interfaces/core/pools/LendingPool/ILendingPool.sol";

contract NoIncentiveToRepayTest is BaseSetup {

using WadRayMath for uint256;

using PercentageMath for uint256;

using SafeCast for uint256;

using SafeERC20 for IERC20;

IERC20 mainnetUSDC = IERC20(address(0xA0b86991c6218b36c1d19D4a2e9Eb0cE3606eB48));

address mainnetUsdcCurveUSDVault = address(0x7cA00559B978CFde81297849be6151d3ccB408A9);

address curveUSDWhale = address(0x4e59541306910aD6dC1daC0AC9dFB29bD9F15c67);

address newUser = makeAddr("new user");

address newUser2 = makeAddr("new user2");

address newUser3 = makeAddr("new user3");

address newUser4 = makeAddr("new user4");

address bob = makeAddr("bob");

address charlie = makeAddr("charlie");

function setUp() public override {

string memory MAINNET_RPC_URL = vm.envString("MAINNET_RPC_URL");

uint256 mainnetFork = vm.createFork(MAINNET_RPC_URL, 19614507);

vm.selectFork(mainnetFork);

super.setUp();

vm.startPrank(owner);

lendingPool.setParameter(ILendingPool.OwnerParameter.LiquidationThreshold, 8000); // 80%

lendingPool.setParameter(ILendingPool.OwnerParameter.HealthFactorLiquidationThreshold, 1e18); // 1.0e18

lendingPool.setParameter(ILendingPool.OwnerParameter.LiquidationGracePeriod, 3 days);

lendingPool.setParameter(ILendingPool.OwnerParameter.LiquidityBufferRatio, 2000); // 20%

lendingPool.setParameter(ILendingPool.OwnerParameter.WithdrawalStatus, 0); // Allow withdrawals

lendingPool.setParameter(ILendingPool.OwnerParameter.CanPaybackDebt, 1); // Enable payback

// house is 1000 with 18 decimals, same as crvUSD

uint256 housePrice = 1_000_000e18;

housePrices.setHousePrice(1, housePrice);

housePrices.setHousePrice(2, housePrice);

housePrices.setHousePrice(3, housePrice);

housePrices.setHousePrice(4, housePrice);

housePrices.setHousePrice(5, housePrice);

housePrices.setHousePrice(6, housePrice);

housePrices.setHousePrice(7, housePrice);

housePrices.setHousePrice(8, housePrice);

vm.stopPrank();

vm.startPrank(curveUSDWhale);

crvUSD.transfer(newUser, 15_000_000e18);

crvUSD.transfer(newUser2, 6_000_000e18);

crvUSD.transfer(newUser3, 1_000_000e18);

crvUSD.transfer(newUser4, 5_000_000e18);

crvUSD.transfer(address(stabilityPool), 10_000_000e18);

crvUSD.transfer(bob, 3_000_000e18);

crvUSD.transfer(charlie, 3_000_000e18);

vm.stopPrank();

}

function makeLiquidityIndexNotRay() public {

vm.startPrank(newUser);

//deposit some crvTokens as well

crvUSD.approve(address(lendingPool), type(uint256).max);

lendingPool.deposit(15_000_000e18);

vm.stopPrank();

vm.startPrank(newUser2);

crvUSD.approve(address(raacNFT), type(uint256).max);

raacNFT.mint(1, 1_000_000e18);

raacNFT.mint(2, 1_000_000e18);

raacNFT.mint(3, 1_000_000e18);

raacNFT.mint(4, 1_000_000e18);

raacNFT.mint(5, 1_000_000e18);

raacNFT.approve(address(lendingPool), 1);

raacNFT.approve(address(lendingPool), 2);

raacNFT.approve(address(lendingPool), 3);

raacNFT.approve(address(lendingPool), 4);

raacNFT.approve(address(lendingPool), 5);

lendingPool.depositNFT(1);

lendingPool.depositNFT(2);

lendingPool.depositNFT(3);

lendingPool.depositNFT(4);

lendingPool.depositNFT(5);

lendingPool.borrow(6_250_000e18);

assertEq(lendingPool.getNormalizedIncome(), 1e27);

vm.stopPrank();

// Here Liquidity Index is 1e27

vm.startPrank(newUser3);

crvUSD.approve(address(lendingPool), 10_000e18);

lendingPool.deposit(10_000e18);

vm.stopPrank();

skip(365 days);

lendingPool.updateState();

}

function test_NoIncentiveForRepayOnBehalfOf() public{

// Step 1. make Liquidity Index and Usage Index greater than 1 Ray

// to simulate normal conditions

makeLiquidityIndexNotRay();

assertTrue(lendingPool.getNormalizedDebt()>1e27);

assertTrue(lendingPool.getNormalizedIncome()>1e27);

// Step 2. Let's have a Depositor, bob with 3Me18 crvTokens

assertEq(crvUSD.balanceOf(bob),3_000_000e18);

// Step 3. Bob mints nft id 8 for 1m

vm.startPrank(bob);

crvUSD.approve(address(raacNFT),type(uint256).max);

raacNFT.mint(8,1_000_000e18);

assertEq(raacNFT.ownerOf(8),bob);

// Step 4. bob deposits NFT

raacNFT.approve(address(lendingPool), 8);

lendingPool.depositNFT(8);

// Step 5. bob borrows maximum amount to trigger liquidation (for simplicity)

uint256 initialBorrowAmount = 1_250_000e18;

lendingPool.borrow(initialBorrowAmount);

vm.stopPrank();

// Step 6. anyone calls initiateLiquidation

lendingPool.initiateLiquidation(bob);

// Step 7. have Charlie come to repay on behalf of Bob

vm.startPrank(charlie);

uint256 originalCharlieBalance =crvUSD.balanceOf(charlie);

assertEq(crvUSD.balanceOf(charlie),3_000_000e18);

crvUSD.approve(address(lendingPool),type(uint256).max);

lendingPool.repayOnBehalf(type(uint256).max, bob);

// Step 8: Assert that Charlie is worse off than before

uint256 crvUSDBalCharlie = crvUSD.balanceOf(charlie);

// Charlie has less crvUSD than before

assertTrue(crvUSDBalCharlie <originalCharlieBalance );

// Charlie still does not own bob's nft

assertTrue(raacNFT.ownerOf(8) != charlie);

assertEq(raacNFT.ownerOf(8) , address(lendingPool));

}

With the following BaseSetup:

// SPDX-License-Identifier: MIT

pragma solidity ^0.8.19;

import "forge-std/Test.sol";

// OpenZeppelin Imports

// import { IERC20 } from "@openzeppelin/contracts/token/ERC20/IERC20.sol";

// import { ERC20 } from "@openzeppelin/contracts/token/ERC20/ERC20.sol";

import {IERC20} from "@openzeppelin/contracts/token/ERC20/IERC20.sol";

import {ERC20} from "@openzeppelin/contracts/token/ERC20/ERC20.sol";

import {IERC721} from "@openzeppelin/contracts/token/ERC721/IERC721.sol";

import {ERC721} from "@openzeppelin/contracts/token/ERC721/ERC721.sol";

// Primitives Import

import {RAACHousePrices} from "../../contracts/core/primitives/RAACHousePrices.sol";

// Token Imports

import {DebtToken} from "../../contracts/core/tokens/DebtToken.sol";

import {DEToken} from "../../contracts/core/tokens/DEToken.sol";

import {IndexToken} from "../../contracts/core/tokens/IndexToken.sol";

import {LPToken} from "../../contracts/core/tokens/LPToken.sol";

import {RAACNFT} from "../../contracts/core/tokens/RAACNFT.sol";

import {RAACToken} from "../../contracts/core/tokens/RAACToken.sol";

import {RToken} from "../../contracts/core/tokens/RToken.sol";

import {veRAACToken} from "../../contracts/core/tokens/veRAACToken.sol";

// Collector Imports

import {Treasury} from "../../contracts/core/collectors/Treasury.sol";

import {FeeCollector} from "../../contracts/core/collectors/FeeCollector.sol";

// Governance Imports

import {Governance} from "../../contracts/core/governance/proposals/Governance.sol";

import {TimelockController} from "../../contracts/core/governance/proposals/TimelockController.sol";

// Gauge Imports

import {BaseGauge} from "../../contracts/core/governance/gauges/BaseGauge.sol";

import {GaugeController} from "../../contracts/core/governance/gauges/GaugeController.sol";

import {IGaugeController} from "../../contracts/interfaces/core/governance/gauges/IGaugeController.sol";

import {RAACGauge} from "../../contracts/core/governance/gauges/RAACGauge.sol";

import {RWAGauge} from "../../contracts/core/governance/gauges/RWAGauge.sol";

// Boost Import

import {BoostController} from "../../contracts/core/governance/boost/BoostController.sol";

// Minter Imports

import {RAACMinter} from "../../contracts/core/minters/RAACMinter/RAACMinter.sol";

import {RAACReleaseOrchestrator} from "../../contracts/core/minters/RAACReleaseOrchestrator/RAACReleaseOrchestrator.sol";

// Oracle Imports

import {BaseChainlinkFunctionsOracle} from "../../contracts/core/oracles/BaseChainlinkFunctionsOracle.sol";

import {RAACHousePriceOracle} from "../../contracts/core/oracles/RAACHousePriceOracle.sol";

import {RAACPrimeRateOracle} from "../../contracts/core/oracles/RAACPrimeRateOracle.sol";

// Pool Imports

import {LendingPool} from "../../contracts/core/pools/LendingPool/LendingPool.sol";

import {StabilityPool} from "../../contracts/core/pools/StabilityPool/StabilityPool.sol";

import {MarketCreator} from "../../contracts/core/pools/StabilityPool/MarketCreator.sol";

import {NFTLiquidator} from "../../contracts/core/pools/StabilityPool/NFTLiquidator.sol";

contract StakingToken is ERC20 {

constructor() ERC20("ST","ST"){

}

function mint(address account, uint256 value) public {

_mint(account, value);

}

function burn(address account, uint256 value) public {

_burn(account, value);

}

contract BaseSetup is Test {

IERC20 baseUSDC = IERC20(address(0x833589fCD6eDb6E08f4c7C32D4f71b54bdA02913));

address baseUSDCWhale = address(0x20FE51A9229EEf2cF8Ad9E89d91CAb9312cF3b7A);

// Collectors

Treasury treasury;

Treasury repairFund;

FeeCollector feeCollector;

// Tokens

IERC20 crvUSD = IERC20(address(0xf939E0A03FB07F59A73314E73794Be0E57ac1b4E)); // main

IERC20 basecrvUSD = IERC20(address(0x417Ac0e078398C154EdFadD9Ef675d30Be60Af93)); // base

RAACToken raacToken;

veRAACToken veRaacToken;

RAACNFT raacNFT;

RToken rToken;

DebtToken debtToken;

DEToken deToken;

address mainnetChainlinkRouter = address(0x65Dcc24F8ff9e51F10DCc7Ed1e4e2A61e6E14bd6);

//m Orchestatro

RAACReleaseOrchestrator raacReleaseOrchestrator;

RAACHousePrices housePrices;

LendingPool lendingPool;

StabilityPool stabilityPool;

RAACMinter minter;

// Governance

Governance public governance;

TimelockController public timelockController;

BoostController public boostController;

GaugeController public gaugeController;

RAACGauge public raacGauge;

RWAGauge public rwaGauge;

address owner;

address user1;

address user2;

address user3;

StakingToken stakingToken;

function setUp() public virtual {

stakingToken = new StakingToken();

owner = makeAddr("owner");

user1 = makeAddr("user1");

user2 = makeAddr("user2");

user3 = makeAddr("user3");

vm.startPrank(owner);

// collectors

// Setup Tokens

raacToken = new RAACToken(owner, 100, 50);

veRaacToken = new veRAACToken(address(raacToken));

// veRAACToken

// RAACNFT

// DeToken

// Setup contracts

raacReleaseOrchestrator = new RAACReleaseOrchestrator(address(raacToken));

housePrices = new RAACHousePrices(owner);

housePrices.setOracle(owner);

raacNFT = new RAACNFT(address(crvUSD), address(housePrices), owner);

rToken = new RToken("RToken", "RT", owner, address(crvUSD));

debtToken = new DebtToken("DebtToken", "DT", owner);

lendingPool = new LendingPool(

address(crvUSD), address(rToken), address(debtToken), address(raacNFT), address(housePrices), 0.1e27

);

console.log("lendingPool:", address(lendingPool));

treasury = new Treasury(owner);

repairFund = new Treasury(owner);

deToken = new DEToken("DEToken", "DEToken", owner, address(rToken));

stabilityPool = new StabilityPool(owner);

minter = new RAACMinter(address(raacToken), address(stabilityPool), address(lendingPool), owner); // should be owner

feeCollector =

new FeeCollector(address(raacToken), address(veRaacToken), address(treasury), address(repairFund), owner);

raacToken.setFeeCollector(address(feeCollector));

raacToken.manageWhitelist(address(feeCollector), true);

raacToken.manageWhitelist(address(veRaacToken), true);

raacToken.manageWhitelist(owner, true);

raacToken.setMinter(address(owner));

raacToken.mint(user2, 1000e18);

raacToken.mint(user3, 1000e18);

feeCollector.grantRole(feeCollector.FEE_MANAGER_ROLE(), owner);

feeCollector.grantRole(feeCollector.EMERGENCY_ROLE(), owner);

feeCollector.grantRole(feeCollector.DISTRIBUTOR_ROLE(), owner);

rToken.setReservePool(address(lendingPool));

debtToken.setReservePool(address(lendingPool));

deToken.setStabilityPool(address(stabilityPool));

raacToken.setMinter(address(minter));

raacToken.transferOwnership(address(minter));

rToken.transferOwnership(address(lendingPool));

debtToken.transferOwnership(address(lendingPool));

stabilityPool.initialize(

address(rToken),

address(deToken),

address(raacToken),

address(minter),

address(crvUSD),

address(lendingPool)

);

lendingPool.setStabilityPool(address(stabilityPool));

// Governance Components

// Timelock controller

address[] memory proposers = new address[](1);

proposers[0] = owner;

address[] memory executors = new address[](1);

executors[0] = owner;

timelockController = new TimelockController(2 days, proposers, executors, owner);

// Governance

governance = new Governance(address(veRaacToken), address(timelockController));

timelockController.grantRole(timelockController.PROPOSER_ROLE(), address(governance));

timelockController.grantRole(timelockController.EXECUTOR_ROLE(), address(governance));

timelockController.grantRole(timelockController.CANCELLER_ROLE(), address(governance));

//Gauge

gaugeController = new GaugeController(address(veRaacToken));

boostController = new BoostController(address(veRaacToken));

rwaGauge = new RWAGauge(address(raacToken), address(stakingToken), address(gaugeController));

raacGauge = new RAACGauge(address(raacToken), address(stakingToken), address(gaugeController));

gaugeController.addGauge(address(rwaGauge),IGaugeController.GaugeType.RWA , 0);

gaugeController.addGauge(address(raacGauge),IGaugeController.GaugeType.RAAC , 0);

rwaGauge.grantRole(rwaGauge.CONTROLLER_ROLE(),owner);

raacGauge.grantRole(rwaGauge.CONTROLLER_ROLE(),owner);

vm.stopPrank();

}

Recommendations

Define some logic to compensate the repayer that is paying on the behalf of someone else.

Updates

Lead Judging Commences

inallhonesty Lead Judge 6 months ago

Submission Judgement Published

Invalidated

Reason: Design choice

Prize pool breakdown

Total prize

77,280 USDC

nSLOC

3,864

20 USDC / LOC

High Medium

74,000

Low

3,280

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