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code-423n4 / 2021-07-spartan-findings

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BondVault `BASE` incentive can be gamed #178

Open code423n4 opened 3 years ago

code423n4 commented 3 years ago

Handle

cmichel

Vulnerability details

BondVault deposits match any deposited token amount with the BASE amount to provide liquidity, see Docs and DAO.handleTransferIn. The matched BASE amount is the swap amount of the token trade in the pool. An attacker can manipulate the pool and have the DAO commit BASE at bad prices which they then later buys back to receive a profit on BASE. This is essentially a sandwich attack abusing the fact that one can trigger the DAO to provide BASE liquidity at bad prices:

  1. Manipulate the pool spot price by dripping a lot of BASE into it repeatedly (sending lots of smaller trades is less costly due to the path-independence of the continuous liquidity model). This increases the token per BASE price.
  2. Repeatedly call DAO.bond(amount) to drip tokens into the DAO and get matched with BASE tokens to provide liquidity. (Again, sending lots of smaller trades is less costly.) As the pool contains low token but high BASE reserves, the spartaAllocation = _UTILS.calcSwapValueInBase(_token, _amount) swap value will be high. The contract sends even more BASE to the pool to provide this liquidity.
  3. Unmanipulate the pool by sending back the tokens from 1. As a lot more BASE tokens are in the reserve now due to the DAO sending it, the attacker will receive more BASE as in 1. as well, making a profit

Impact

The DAO's Bond allocation can be stolen. The cost of the attack is the trade fees in 1. + 3. as well as the tokens used in 2. to match the BASE, but the profit is a share on the BASE supplied to the pool by the DAO in 2.

Recommended Mitigation Steps

Track a TWAP spot price of the TOKEN <> BASE pair and check if the BASE incentive is within a range of the TWAP. This circumvents that the DAO commits BASE at bad prices.

verifyfirst commented 3 years ago

Implementing a TWAP needs more discussion and ideas to help with price manipulation. Attacking BOND is limited by its allocation, time and the fact that it's locked over 6months.

ghoul-sol commented 3 years ago

Per sponsor comment making this medium risk