Storage Proofs

Summary

Per the docs, the price smoothening mechanism in ScrvusdOracleV2 is intended to prevent sandwich attacks, but cause we have this in the form of an abrupt max_change limitation and not a TWAP this actually enables a different form of slow sandwiching or better still (front/back run).. Since the maximum price change is calculated deterministically based on timestamp differences, attackers can precisely predict future price movements and position themselves to profit from this knowledge, essentially creating a more sophisticated form of sandwiching.

Vulnerability Details

The intended price smoothening logic from the docs is implemented in ScrvusdOracleV2#_smoothed_price() where we restrict the change based on the max_price_increment:

But the max_change calculation is entirely deterministic and based on:

1. The current timestamp (block.timestamp)

2. The last update timestamp (self.last_update)

3. The last price (last_price)

4. The max_price_increment constant

All of these values can be easily calculated. Now, when the difference between the raw price and last price exceeds max_change, the function returns a price that is exactly at the limit on the upside (if going up) or last_price - max_change (if going down).

This however creates a situation where attackers can:

• Observe that a price update is coming since they know the price on mainnet

• Calculate the exact future price that will be returned by the smoothened functions

• Position themselves to profit from this knowledge

• Execute their strategy after the price update

Even more problematically, they can wait for the optimal moment to execute their strategy, as the max_change grows linearly with time due to the (block.timestamp - self.last_update) component in the calculation.

Impact

This predictable smoothening mechanism undermines the very purpose of the price protection and still allows for sandwiching, just that in this case it's quite slow.

So attackers can calculate exactly how much the price will move in a given update, determine the best time to execute their strategy based on the growing max_change and take positions in DeFi protocols that benefit from the predictable price movement, based on the context of the defi protocol ingesting this.

Tools Used

Manual review

Recommendations

Consider using a time-weighted average price (TWAP) mechanism instead of the current smoothening that still has an abrupt max_change factor.