Virgin stake can claim all drops

[code423n4]

Lines of code

https://github.com/code-423n4/2023-05-xeth/blob/d86fe0a9959c2b43c62716240d981ae95224e49e/src/wxETH.sol#L222-L256

Vulnerability details

Impact

If wxETH drips when nothing is staked, then the first staker can claim every drop.

Proof of Concept

Suppose drip is enabled when totalSupply() == 0. At least one block passes and the first staker stakes, just 1 xETH is enough. This mints her 1 wxETH. This also calls _accrueDrip() (by the drip modifier) which drips some amount of xETH. Note that _accrueDrip() is independent of totalSupply(), so it doesn't matter how little she stakes. cashMinusLocked is now 1 plus the amount dripped. Naturally, since she owns the entire supply she can immediately unstake the entire cashMinusLocked. Specifically, the exchangeRate() is now (cashMinusLocked * BASE_UNIT) / totalSupply() and she gets (totalSupply() * exchangeRate()) / BASE_UNIT = cashMinusLocked.

The issue is simply that drip is independent of staked amount, especially that it may drip even when nothing is staked, which enables the above attack.

Recommended Mitigation Steps

Note what happens when totalSupply() > 0. Then drops will fall on existing wxETH, and any new staker will trigger a drip before having to pay the new exchange rate which includes the extra drops. So a new staker in this case cannot unstake more than they staked; all drops go to previous holders. Therefore, do not drip when totalSupply == 0; in _accrueDrip():

-if (!dripEnabled) return;
+if (!dripEnabled || totalSupply() == 0) return;

Assessed type

MEV

[5z1punch]

Dup for L1 of https://github.com/code-423n4/2023-05-xeth-findings/issues/19

[c4-sponsor]

vaporkane marked the issue as disagree with severity

[c4-sponsor]

vaporkane requested judge review

[kirk-baird]

It is true that the first staker may claim all previous dripped rewards. I consider this a medium severity issue as the likelihood is very low since it only occurs for the first staker and only if the strip was started before any stakers deposited.

[c4-judge]

kirk-baird changed the severity to 2 (Med Risk)

[c4-judge]

kirk-baird marked the issue as primary issue

[c4-judge]

kirk-baird marked the issue as selected for report

[c4-sponsor]

vaporkane marked the issue as sponsor confirmed