Analysis

[c4-bot-7]

See the markdown file with the details of this report here.

[0xRobocop]

Generic recommendations

[c4-pre-sort]

0xRobocop marked the issue as insufficient quality report

[OpenCoreCH]

Generic recommendations, at least some of them seem to be copy-pasted (OpenZeppelin upgradability) and do not apply here.

[c4-judge]

OpenCoreCH marked the issue as grade-c

[sathishpic22]

Hi @OpenCoreCH

Thank you for your effort and time in evaluating my reports. After reviewing the reports graded as 'A,' I've noticed they tend to focus heavily on detailed implementation aspects. It's my understanding that our sponsors might already be familiar with these details, hence my approach was in line with the C4 recommendations, aiming for a balance between detail and overview.

My attempt was to veer away from purely conventional analysis, adopting a different angle as suggested by C4, though I admit to some standard recommendations, which seem unavoidable yet were also observed in other top-graded reports.

Systemic Risks

• Faulty SimpleImbalance Mechanism
• Incorrect Fee Calculation and Distribution Risk
• Mismanagement of NFT-based Liquidity Positions
• Impermanent Loss risk
• Pool Poisoning Risk

Technical risks

• Incorrect Asset Valuation
• Amplification Parameter Mismanagement
• Errors in Omnipool Hooks (on_liquidity_changed, on_trade, on_trade_fee)
• Oracle Integration and Data Handling
• Circuit Breaker Mechanism Failures
• Asset Addition and Removal Protocols
• Dependency Risks

Integration risks

• Asset Swapping Mechanism Integration
• Inter-Contract Messaging and Calls
• Cross-Protocol Reward and Incentive Schemes

Admin abuse risks

• Manipulation of add_token and Asset Parameters
• Misuse of set_asset_tradable_state Function
• Unauthorized Protocol Upgrades or Changes
• Control Over Emergency Functions
• Fee Distribution Adjustments:
• Parameter Manipulation
• Insufficient Oversight
• Unauthorized Pool Creation or Asset Addition

Code Weak Spots

• Arithmetic Operations
• Liquidity Removal and Slippage Control
• Hub Asset Special Cases
• Permissions and Role Management
• Asset Liquidity and Withdrawal Limits

These are not generic analysis suggestions; they are specifically tailored to this protocol. I highlighted more risks than any other report did. While many reports concentrated on contract-specific issues, my focus was on the broader protocol, providing overall recommendations. I covered more areas than any other report and concentrated solely on technical aspects, rather than merely explaining implementation details in depth.

Yes, one or two of my suggestions may be generic, but overall, I believe my analysis was more detailed than that of any other report, in my opinion.

I feel my report, especially with the inclusion of architecture and flow diagrams, could be on par with those receiving higher grades. Your feedback would be crucial for me as I aim to refine my approach in future reports.

Thank you once again for this opportunity to share my perspective. Looking forward to your valuable suggestions.

Thank you

[OpenCoreCH]

Hi @sathishpic22

Thanks for your feedback. My reasoning for the grade (which in this case matches the Lookout's assessment) was that the report was very generic. For instance, many points essentially state "if there is a bug here, this would be problematic":

Incorrect Adjustments: If there are errors in the logic or implementation of the SimpleImbalance mechanism (e.g., due to programming mistakes, oversight, or incorrect assumptions), it might not accurately reflect the true state of the hub asset's balance within the pool.

Improper Minting or Burning: Consequently, the system may mint or burn the hub asset incorrectly. For instance, it might mint too much of the hub asset during a deficit, leading to oversupply, or burn too much during a surplus, leading to scarcity.

Incorrect Calculation: If the on_trade_fee hook contains errors in its fee calculation logic, it could either overcharge or undercharge traders. Overcharging can lead to traders avoiding the pool due to unfavorable rates, while undercharging may not provide adequate compensation to liquidity providers or support for the protocol's maintenance.

Incorrect NFT Data: If there are errors in the code responsible for minting NFTs or recording liquidity information within them, NFTs could represent incorrect stakes in the pool. This could be due to bugs in the minting process, errors in the data assignment, or issues during the update or redemption phases.

That's of course correct, but applies to every protocol.

Other parts are kept very generic and could basically be copy-pasted to other protocols 1:1, one example:

Malicious Asset Addition: If a malicious actor successfully adds a fraudulent or compromised token to a liquidity pool, they may artificially inflate the token's value or manipulate the pool's balance. Unsuspecting users might then trade their legitimate assets for these worthless or malicious tokens.

This is not very concrete. Who would be the malicious actor in the case of HydraDX? You write that they may artificially inflate the token's value or manipulate the pool's balance, how would they do that? What would be the exact impact for users? Answering such questions would be valuable because it allows to get an overview over the concrete risks that the protocol faces.

So I think you are overall on the right path, but I would be a bit more concrete. Of course, the analysis report does not need to be extremely detailed, but it should contain protocol-specific things to be valuable for the reader.