Missing deadline checks allow pending transactions to be maliciously executed

[code423n4]

Lines of code

https://github.com/code-423n4/2023-05-maia/blob/cfed0dfa3bebdac0993b1b42239b4944eb0b196c/src/talos/libraries/PoolActions.sol#L46-L52

Vulnerability details

Impact

In PoolActions.sol, swapToEqualAmounts() function has no deadline check for the transaction when swapping.

File: src/talos/libraries/PoolActions.sol

    function swapToEqualAmounts(ActionParams memory actionParams, int24 baseThreshold) internal {
        (bool zeroForOne, int256 amountSpecified, uint160 sqrtPriceLimitX96) = actionParams
            .pool
            .getSwapToEqualAmountsParams(
            actionParams.optimizer, actionParams.tickSpacing, baseThreshold, actionParams.token0, actionParams.token1
        );

        //Swap imbalanced token as long as we haven't used the entire amountSpecified and haven't reached the price limit
        actionParams.pool.swap(
            address(this),
            zeroForOne,
            amountSpecified,
            sqrtPriceLimitX96,
            abi.encode(SwapCallbackData({zeroForOne: zeroForOne}))
        );
    }

AMMs provide their users with an option to limit the execution of their pending actions, such as swaps or adding and removing liquidity. The most common solution is to include a deadline timestamp as a parameter (for example see Uniswap V2 and Uniswap V3). If such an option is not present, users can unknowingly perform bad trades:

1) Alice wants to swap 100 tokens for 1 ETH and later sell the 1 ETH for 1000 DAI. 2) The transaction is submitted to the mempool, however, Alice chose a transaction fee that is too low for miners to be interested in including her transaction in a block. The transaction stays pending in the mempool for extended periods, which could be hours, days, weeks, or even longer. 3) When the average gas fee dropped far enough for Alice’s transaction to become interesting again for miners to include it, her swap will be executed. In the meantime, the price of ETH could have drastically changed. She will still get 1 ETH but the DAI value of that output might be significantly lower. She has unknowingly performed a bad trade due to the pending transaction she forgot about.

An even worse way this issue can be maliciously exploited is through MEV:

1) The swap transaction is still pending in the mempool. Average fees are still too high for miners to be interested in it. The price of tokens has gone up significantly since the transaction was signed, meaning Alice would receive a lot more ETH when the swap is executed. But that also means that her maximum slippage value (sqrtPriceLimitX96 and minOut in terms of the Spell contracts) is outdated and would allow for significant slippage. 2) A MEV bot detects the pending transaction. Since the outdated maximum slippage value now allows for high slippage, the bot sandwiches Alice, resulting in significant profit for the bot and significant loss for Alice.

Proof of Concept

https://github.com/code-423n4/2023-05-maia/blob/cfed0dfa3bebdac0993b1b42239b4944eb0b196c/src/talos/libraries/PoolActions.sol#L46-L52

Tools Used

Manual review

Recommended Mitigation Steps

Introduce a deadline parameter to all functions which potentially perform a swap.

Assessed type

Other

[c4-judge]

trust1995 marked the issue as duplicate of #171

[c4-judge]

trust1995 marked the issue as satisfactory

[c4-judge]

trust1995 changed the severity to 2 (Med Risk)