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

`deposit()` calculates fee and updates exchange rate on every deposit → exchange rate inflates with deposits that should be fee-free

aiada

Description

  • Normal: Depositing tokens into a lending protocol should not generate fees. Fees are earned from flash loan interest, not from deposits themselves.

  • Bug: deposit() calls getCalculatedFee() and updateExchangeRate() — treating every deposit as a fee-generating event and artificially inflating the exchange rate.

// ThunderLoan.sol (original — BUGGY)
function deposit(IERC20 token, uint256 amount) external {
// ...
//@> These two lines should not be here — deposit is not a fee event
uint256 calculatedFee = getCalculatedFee(token, amount); // Line 153
assetToken.updateExchangeRate(calculatedFee); // Line 154
// ...
}
​
// ThunderLoanUpgraded.sol (FIXED) — these two lines are REMOVED from deposit()

Risk

Likelihood:

  • Every call to deposit() triggers the bug — it's the function's normal execution path

  • No special conditions needed — any depositor inflates the rate

Impact:

  • Early depositors receive disproportionately more shares due to inflated rate

  • Late depositors receive fewer shares for the same deposit amount

  • Exchange rate permanently diverges from the actual underlying asset value

  • Economic attack: deposit large amount first → rate inflates → all subsequent depositors get worse rates → attacker withdraws at inflated rate for profit

Proof of Concept

The fix is confirmed by comparing the two versions:

  • ThunderLoan.sol lines 153-154: getCalculatedFee + updateExchangeRate present in deposit()

  • ThunderLoanUpgraded.sol: Both lines removed from deposit() — the upgrade explicitly fixes this

forge test --match-test test_DepositBugConfirmedByComparison -vvv
# Result: [PASS] test_DepositBugConfirmedByComparison() — bug confirmed via source diff.

Recommended Mitigation

function deposit(IERC20 token, uint256 amount) external {
- uint256 calculatedFee = getCalculatedFee(token, amount);
- assetToken.updateExchangeRate(calculatedFee);
// ... rest of deposit logic
}
Updates

Lead Judging Commences

ai-first-flight-judge Lead Judge 3 days 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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