lemonmon - A user can get more dTokens than they should get via `D3VaultFunding.userDeposit()`, due to accounting issues in `D3VaultLiquidation.liquidate()`

[sherlock-admin]

lemonmon

high

A user can get more dTokens than they should get via D3VaultFunding.userDeposit(), due to accounting issues in D3VaultLiquidation.liquidate()

Summary

The vault token balance (assetInfo[debt].balance) is not updated during liquidation (D3VaultLiquidation.liquidate()).

Thus, a user who calls D3VaultFunding.userDeposit() can get more dTokens than they should get.

Vulnerability Detail

When D3VaultLiquidation.liquidate() is called, the debt is transferred to the vault:

https://github.com/sherlock-audit/2023-06-dodo/blob/main/new-dodo-v3/contracts/DODOV3MM/D3Vault/D3VaultLiquidation.sol#L55

But assetInfo[debt].balance is not updated, even though the debt tokens were received.

This leads to the issue that if a user deposits this debt token right after the liquidation, they will receive more dTokens in return than they should, because D3VaultFunding.userDeposit() is using the wrongly tracked value of assetInfo[debt].balance:

https://github.com/sherlock-audit/2023-06-dodo/blob/main/new-dodo-v3/contracts/DODOV3MM/D3Vault/D3VaultFunding.sol#L32-L34

As a result, the protocol will mint more dTokens for the user than they should receive:

https://github.com/sherlock-audit/2023-06-dodo/blob/main/new-dodo-v3/contracts/DODOV3MM/D3Vault/D3VaultFunding.sol#L39-L41

Impact

A user can call D3VaultFunding.userDeposit() right after a token got liquidated by D3VaultLiquidation.liquidate(), resulting in that the user will receive more dToken than they should receive, due to accounting issues in D3VaultLiquidation.liquidate().

All LP holders will suffer from inflated dTokens.

Code Snippet

https://github.com/sherlock-audit/2023-06-dodo/blob/main/new-dodo-v3/contracts/DODOV3MM/D3Vault/D3VaultLiquidation.sol#L55

https://github.com/sherlock-audit/2023-06-dodo/blob/main/new-dodo-v3/contracts/DODOV3MM/D3Vault/D3VaultFunding.sol#L32-L34

https://github.com/sherlock-audit/2023-06-dodo/blob/main/new-dodo-v3/contracts/DODOV3MM/D3Vault/D3VaultFunding.sol#L39-L41

Tool used

Manual Review

Recommendation

After D3VaultLiquidation.liquidate() is transferring the debt tokens to the vault, update the assetInfo[debt].balance of the vault.

If the repaid debt in D3VaultLiquidation.liquidate() was meant to be sent to the pool, like in the function D3VaultLiquidation.liquidateByDODO(), the ID3MM(pool).updateReserveByVault(debt) should be called at the end of D3VaultLiquidation.liquidate(). Otherwise a very similar problem can occur since the state.balances[debtToken] is not being updated. state.balances[debtToken] is used in a similar way in the D3Trading.sol contract to determine the actual balance received.

[traceurl]

fixed in https://github.com/DODOEX/new-dodo-v3/pull/28

[IAm0x52]

Fix looks good. Balance is now properly updated when a pool is liquidated