c4-bot-9 commented 9 months ago

Lines of code

https://github.com/code-423n4/2024-01-salty/blob/53516c2cdfdfacb662cdea6417c52f23c94d5b5b/src/dao/DAO.sol#L321

Vulnerability details

Impact

The DAO contract cannot handle any token beside SALT tokens. So, if tokens like USDS or DAI were in its balance, they will be lost forever.

This can happen during the upkeep calls. Basically, during upkeep the contract takes some percentage from the arbitrage profits and use them to form POL for the DAO (usds/dai and salt/usds). The DAO swaps the ETH for both of the needed tokens and then adds the liquidity using the zapping flag to true.

https://github.com/code-423n4/2024-01-salty/blob/53516c2cdfdfacb662cdea6417c52f23c94d5b5b/src/dao/DAO.sol#L316-L324

Zapping will compute the amount of either tokenA or tokenB to swap in order to add liquidity at the final ratio of reserves after the swap. But, it is important to note that the zap computations do no take into account that the same pool may get arbitraged atomically, changing the ratio of reserves a little.

As a consequence, some of the USDS and DAI tokens will be send back to the DAO contract:

https://github.com/code-423n4/2024-01-salty/blob/53516c2cdfdfacb662cdea6417c52f23c94d5b5b/src/staking/Liquidity.sol#L110C3-L115C1

Proof of Concept

The following coded PoC should be pasted into root_tests/Upkeep.t.sol, actually its the same test that can be found at the end of the file with some added lines to showcase the issue. Specifically, it shows how the USDS and DAI balance of the DAO are zero before upkeep and how both are greater than zero after upkeep.

function testDoublePerformUpkeep() public {

        _setupLiquidity();
        _generateArbitrageProfits(false);

        // Dummy WBTC and WETH to send to Liquidizer
        vm.prank(DEPLOYER);
        weth.transfer( address(liquidizer), 50 ether );

        // Indicate that some USDS should be burned
        vm.prank( address(collateralAndLiquidity));
        liquidizer.incrementBurnableUSDS( 40 ether);

        // Mimic arbitrage profits deposited as WETH for the DAO
        vm.prank(DEPLOYER);
        weth.transfer(address(dao), 100 ether);

        vm.startPrank(address(dao));
        weth.approve(address(pools), 100 ether);
        pools.deposit(weth, 100 ether);
        vm.stopPrank();

        // === Perform upkeep ===
        address upkeepCaller = address(0x9999);

        uint256 daiDaoBalanceBefore = dai.balanceOf(address(dao));
        uint256 usdsDaoBalanceBefore = usds.balanceOf(address(dao));

        assertEq(daiDaoBalanceBefore, 0);
        assertEq(usdsDaoBalanceBefore, 0);

        vm.prank(upkeepCaller);
        upkeep.performUpkeep();
        // ==================

        _secondPerformUpkeep();

        uint256 daiDaoBalanceAfter = dai.balanceOf(address(dao));
        uint256 usdsDaoBalanceAfter = usds.balanceOf(address(dao));

        assertTrue(daiDaoBalanceAfter > 0);
        assertTrue(usdsDaoBalanceAfter > 0);
}