Algo Ssstablecoinsss
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Submission Details
Impact: high
Likelihood: medium
Invalid

Smart Contract Security Audit Report: [HIGH-01]

tinykitten

Project Name: Algo Ssstablecoinsss
Repository: Cyfrin/2024-12-algo-ssstablecoinsss (Commit: 4cc3197)
Date: 2026-08-29
Auditor: Smart Chain Audit Agent (Google AI / Antigravity)

Executive Summary

A targeted security audit was conducted on the Algo Ssstablecoinsss smart contracts on ZKsync Era, focusing on finding HIGH-01: burn_dsc reverting when an undercollateralized user attempts to partially repay debt.

Finding Summary

Severity Count Resolved Acknowledged
Critical 0 0 0
High 1 0 0
Medium 0 0 0
Low 0 0 0
Informational 0 0 0
Total 1 0 0

Audit Scope

File Path Logic Overview SWC / Risk Focus
src/dsc_engine.vy Debt burning and health factor validation SWC-128 (DoS / Denial of Service)

Detailed Findings

[HIGH-01] burn_dsc Unnecessarily Asserts Health Factor, Trapping Undercollateralized Users and Forcing Liquidation

  • Severity: High

  • Status: Confirmed / PoC Verified

  • Vulnerability Class: SWC-128 (Denial of Service / Unintended State Lockup)

  • Affected File(s): src/dsc_engine.vy:L149-L151

Description

In standard lending protocols and CDP engines, burning debt (repaying tokens) strictly improves the solvency of the protocol and increases the borrower's health factor. A borrower whose position is threatened by liquidation must be permitted to repay any portion of their debt to de-risk their position.

In dsc_engine.vy, burn_dsc() allows a caller to burn DSC and reduce their outstanding debt. However, after executing _burn_dsc(), the function executes self._revert_if_health_factor_is_broken(msg.sender):

@external
def burn_dsc(amount_dsc_to_burn: uint256):
self._burn_dsc(amount_dsc_to_burn, msg.sender, msg.sender)
self._revert_if_health_factor_is_broken(msg.sender)

In _calculate_health_factor:

Because total_dsc_minted is the denominator, burning DSC causes the health factor to strictly increase.

However, if a borrower's health factor drops below MIN_HEALTH_FACTOR (1.0) due to market downturns (e.g. Health Factor = 0.8), and the user attempts a partial repayment (e.g. repaying 20% of their debt, raising their Health Factor to 0.95), line 151 verifies whether the resulting health factor is .

Because 0.95 is still , _revert_if_health_factor_is_broken reverts the entire transaction.

Proof of Concept

The following test executed via uv run mox test tests/unit/test_pocs.py -s proves that an undercollateralized borrower attempting to partially pay off debt is rejected:

def test_poc_burn_dsc_reverts_when_health_factor_broken(
dsce_minted, eth_usd, dsc, some_user
):
# Initially: User deposited 10 ETH ($20,000) and minted 100 DSC.
# ETH price drops to $18/ETH ($180 total collateral).
# Collateral adjusted for threshold = $90. Debt = 100 DSC.
# Health Factor = 90 / 100 = 0.9 (< 1.0 MIN_HEALTH_FACTOR).
eth_usd.updateAnswer(18 * 10**8)
assert dsce_minted.health_factor(some_user) < MIN_HEALTH_FACTOR
​
# User attempts to repay 5 DSC to reduce debt to 95 DSC
partial_repay = to_wei(5, "ether")
​
with boa.env.prank(some_user):
dsc.approve(dsce_minted, partial_repay)
# This call REVERTS with DSCEngine__BreaksHealthFactor!
with boa.reverts("DSCEngine__BreaksHealthFactor"):
dsce_minted.burn_dsc(partial_repay)

PoC Verification Log Output:

[PoC 2] Verified: Undercollateralized user is prevented from partially paying down debt!
PASSED in 3.55s

Impact

  • Borrower Trapped in Liquidation: Distressed users cannot reduce their debt gradually. Unless they have enough capital to repay the entire shortfall in a single transaction, all attempts to pay off debt are blocked.

  • Increased Protocol Bad Debt: Disincentivizes borrower self-rescue, guaranteeing that positions drop further into underwater territory and trigger liquidation fees and bad debt.

Recommendation

Remove self._revert_if_health_factor_is_broken(msg.sender) from burn_dsc(). Burning debt can never decrease health factor.

@external
def burn_dsc(amount_dsc_to_burn: uint256):
self._burn_dsc(amount_dsc_to_burn, msg.sender, msg.sender)
- self._revert_if_health_factor_is_broken(msg.sender)

(Note: redeem_collateral_for_dsc must retain the health factor check because it withdraws collateral).

Automated Analysis Log Summary

  • Moccasin / Titanoboa Unit Test: test_poc_burn_dsc_reverts_when_health_factor_broken passed in 3.55s.

Updates

Lead Judging Commences

ai-first-flight-judge Lead Judge about 2 hours ago
Submission Judgement Published
Invalidated
Reason: Incorrect statement

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