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Regnum Aurum Acquisition Corp
HardhatReal World AssetsNFT
77,280 USDC
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Submission Details
Severity: medium
Valid

Incorrect Prime Rate Update Timing Leads to Incorrect Interest Calculation

dobrevaleri

Summary

The LendingPool::setPrimeRate() function does not synchronize the reserve state before updating the prime rate, causing incorrect interest calculations for past periods.

Vulnerability Details

When setting a new prime rate in LendingPool::setPrimeRate(), the function calls ReserveLibrary::setPrimeRate() which updates the prime rate without first synchronizing the reserve state. This means the new prime rate will be applied retroactively to the period between the last update and the current timestamp.

The issue occurs because ReserveLibrary::setPrimeRate() only validates the rate change and updates the rates:

function setPrimeRate(ReserveData storage reserve, ReserveRateData storage rateData, uint256 newPrimeRate) internal {
if (newPrimeRate < 1) revert PrimeRateMustBePositive();
​
uint256 oldPrimeRate = rateData.primeRate;
​
if (oldPrimeRate > 0) {
uint256 maxChange = oldPrimeRate.percentMul(500); // Max 5% change
uint256 diff = newPrimeRate > oldPrimeRate ? newPrimeRate - oldPrimeRate : oldPrimeRate - newPrimeRate;
if (diff > maxChange) revert PrimeRateChangeExceedsLimit();
}
​
rateData.primeRate = newPrimeRate;
updateInterestRatesAndLiquidity(reserve, rateData, 0, 0);
​
emit PrimeRateUpdated(oldPrimeRate, newPrimeRate);
}

Proof of Concept

  1. At t=0, prime rate is set to 5 RAY

  2. At t=100, no reserve sync has occurred

  3. At t=100, prime rate is updated to 5.2 RAY

  4. The new rate is applied retroactively to t=0-100

  5. Interest for t=0-100 is calculated using 5.2 RAY instead of the correct 5 RAY

Impact

This leads to incorrect interest calculations as the new prime rate is applied retroactively to past periods. Since the prime rate is a key component in calculating both liquidity and usage rates, this affects:

  • Interest earned by lenders

  • Interest owed by borrowers

  • Health factor calculations

The impact is amplified when there are frequent prime rate changes without reserve synchronization.

Recommendations

Synchronize reserves before updating prime rate:

function setPrimeRate(uint256 newPrimeRate) external onlyPrimeRateOracle {
+ ReserveLibrary.updateReserveState(reserve, rateData);
ReserveLibrary.setPrimeRate(reserve, rateData, newPrimeRate);
}
Updates

Lead Judging Commences

inallhonesty Lead Judge 3 months ago
Submission Judgement Published
Validated
Assigned finding tags:

ReserveLibrary fails to update reserve state before changing rate parameters (prime rate, protocol fee rate), causing new rates to be applied retroactively to interest since last update

inallhonesty Lead Judge 3 months ago
Submission Judgement Published
Validated
Assigned finding tags:

ReserveLibrary fails to update reserve state before changing rate parameters (prime rate, protocol fee rate), causing new rates to be applied retroactively to interest since last update

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