Core Contracts

Summary

The borrow function in the LendingPool contract contains an incorrect collateral sufficiency check, enabling users to borrow amounts that exceed safe collateralization limits.

This flaw allows the creation of under-collateralized loans, threatening protocol solvency.

Vulnerability Details

Exploit Example:

Parameters:

• Collateral: 100 ETH

• Liquidation Threshold: 80% (0.8)

• 1st Borrow Attempt: 90 ETH

Current Check Execution:
collateralValue (100 ETH) < ( 90 ETH) * 0.8 → 100 < 72 → false(so does not revert) → borrow allowed

Resulting Position:

• Debt/Collateral Ratio: 90% (90 ETH debt vs. 100 ETH collateral)

• Required Collateral (Correct):
  

• Undercollateralized by 12.5 ETH

Impact

Critical Severity (Protocol Insolvency Risk):

1. Bad Debt Accumulation: Users can borrow more than collateral allows.

2. Liquidation Failure: Undercollateralized positions cannot be profitably liquidated.

3. Protocol Insolvency: Total debt exceeds collateral value, leading to systemic collapse.

Recommendations

Mitigation Code

change the check to the following