Algo Ssstablecoinsss
AI First Flight #2
Beginner FriendlyDeFi
EXP
View results
Previous Next
Submission Details
Severity: medium
Valid

72-Hour Stale Price Timeout Enables Protocol Insolvency During Market Volatility

harisebrat

72-Hour Stale Price Timeout Allows Protocol Insolvency During Market Volatility

Description

The oracle library uses a 72-hour timeout for stale price checks, which far exceeds Chainlink's typical 1-hour heartbeat for major price feeds.

This allows the protocol to use severely outdated prices for collateral valuation, enabling users to mint excess DSC or avoid liquidation during price crashes.

​
// oracle_lib.vy:15
TIMEOUT: constant(uint256) = 72 * 3600 // @> 72 hours - far exceeds 1hr heartbeat
​
// oracle_lib.vy:47-48
seconds_since: uint256 = block.timestamp - updated_at
assert seconds_since <= TIMEOUT, "DSCEngine_StalePrice" // @> Accepts 72hr old prices


Risk: High

Likelihood:

This will happen every time crypto markets experience significant volatility, which occurs regularly during flash crashes, liquidation cascades, and black swan events where prices move 30%+ within 24-48 hours.

Impact: High

Users mint DSC against collateral valued at stale high prices, creating undercollateralized positions.

Underwater positions avoid liquidation because the protocol still sees healthy collateral ratios.

Protocol accumulates bad debt across multiple users leading to potential insolvency.

Proof of Concept

  1. ETH price is $2000, Alice deposits 1 ETH and mints 1000 DSC (50% ratio).

  2. ETH crashes 40% to $1200 over 48 hours.

  3. Oracle data is 48 hours stale but within 72-hour timeout, still showing $2000/ETH.

  4. Alice's position shows healthy (200% ratio) when actually underwater (120% ratio).

  5. Bob attempts to liquidate Alice but cannot because health factor appears fine.

  6. Bad debt accumulates as more users remain in similar underwater positions.


Recommended Mitigation

​
- TIMEOUT: constant(uint256) = 72 * 3600
+ TIMEOUT: constant(uint256) = 3 * 3600
Updates

Lead Judging Commences

ai-first-flight-judge Lead Judge about 14 hours ago
Submission Judgement Published
Validated
Assigned finding tags:

[M-01] The TIMEOUT is set as a fixed constant of 72 hours, which makes it inflexible in adapting to the market price.

## Description In this contract, the TIMEOUT is set as a fixed constant (72 hours, or 259200 seconds). This means that if the oracle price data is not updated within 72 hours, the data will be considered outdated, and the contract will trigger a revert. ## Vulnerability Details At this location in the code, <https://github.com/Cyfrin/2024-12-algo-ssstablecoinsss/blob/4cc3197b13f1db728fd6509cc1dcbfd7a2360179/src/oracle_lib.vy#L15> ```Solidity TIMEOUT: constant(uint256) = 72 * 3600 ``` the timeout is directly set to 72 hours. For an oracle, which cannot dynamically adjust the price updates, this is a suboptimal approach. ## Impact - Fixed Timeout: The TIMEOUT is hardcoded to 72 hours. In markets with frequent fluctuations or assets that require more frequent price updates, 72 hours might be too long. Conversely, if the timeout is too short, it could cause frequent errors due to the inability to update data in time, disrupting normal contract operations. - Non-adjustable Timeout: If the contract's requirements change (e.g., market conditions evolve or the protocol requires more flexibility), the fixed TIMEOUT cannot be dynamically adjusted, leading to potential mismatches with current needs. - Lack of Flexibility: The current timeout mechanism is static and cannot be adjusted based on market volatility or the frequency of oracle updates. In volatile markets, a shorter TIMEOUT might be necessary, while in stable markets, a longer timeout would be more appropriate. \##Tools Used Manual review ## Recommendations Introduce a dynamic price expiration mechanism that adjusts based on market conditions. Use volatility data (such as standard deviation or market price fluctuation) to dynamically adjust the timeout period. This can be achieved by monitoring market volatility and adjusting the TIMEOUT accordingly: ```Solidity # Monitor market volatility and dynamically adjust TIMEOUT @external def adjustTimeoutBasedOnVolatility(volatility: uint256): if volatility > HIGH_VOLATILITY_THRESHOLD: self.TIMEOUT = SHORTER_TIMEOUT # In high volatility, decrease TIMEOUT else: self.TIMEOUT = LONGER_TIMEOUT # In stable market, increase TIMEOUT log TimeoutAdjusted(self.TIMEOUT) ```

Support

FAQs

Can't find an answer? Chat with us on Discord, Twitter or Linkedin.

Give us feedback!