✅RACE #14 - Lending

Note: Questions 1 & 2 are based on the below code snippet. You will see the same code snippet for these two questions. The questions are below the code snippet.

Question 1 ✅

contract USDCCollateral {
    // This is a contract that's part of a larger system implementing a lending protocol
    // This particular contract concerns itself with allowing people to deposit USDC as collateral for their loans

    // A list of all the addresses lending
    address[] lenders;
    // A mapping to allow efficient is lender checks
    mapping(address => bool) isLender;

    address immutable lendingPlatform;
    address token = ERC20(USDC_ADDRESS);

    // We use a mapping to store the deposits of all lenders
    mapping (address => bool) balance;

    // USDC is very stable, so for every 1 USDC you can borrow 1 DAI or 1 USD worth of the other currency
    // Similar to other lending platforms, this lending system uses an oracle to determine how much one can borrow. 
    // The following describes how the system determines the max borrow value (ignoring precision for simplicity).
    // maxBorrow = (collateralRatio * underlying * underlyingValueUSD) / otherValueUSD 
    // This encodes the margin requirement of the system.
    uint collateralRatio = 100_000_000; 

    constructor() {
        periodicFee = 1;

        // approved collateral contracts are deployed by the lending platform
        // assume it is implemented correctly, and doesn't allow false collateral contracts.
        lendingPlatform = msg.sender;
    }

    function deposit(uint amount) external {
        require(!isLender[msg.sender]);
        isLender[msg.sender] = true;
        lenders.push(msg.sender);

        ...
    }

    function computeFee(uint periodicFee, uint balance) internal returns (uint) {
        // Assume this is a correctly implemented function that computes the share of fees that someone should receive based on their balance.
    }

    // this function is called monthly by the lending platform
    // We compute how much fees the lender should receive and send it to them
    function payFees() external onlyLendingPlatform {
        for (uint i=0; i<lenders.length; i++) {
            // Compute fee uses the balance of each lender
            uint fee = computeFee(periodicFee, balance[lenders[i]]);
            token.transferFrom(lendingPlatform, lenders[i], fee);
        }
    }
    ...
}

Lending platforms have a few options to configure when it comes to adding new tokens as collateral. For example, you’ll have to set up an oracle for the price of the collateral, and you have to configure a margin requirement. The security concern with using the given collateral configuration is:

Question 2 ✅

Assuming payFees() is periodically called by a function, which iteratively calls payFees() of all collateral contracts, the security concern(s) is/are:

Question 3 ✅

modifier noETH {
    require(balanceOf(this) == 0);
    _;
}

The developers want to prevent people from accidentally sending ETH instead of WETH and have implemented a noETH modifier, as defined above, and annotated the deposit function with it. They have also not implemented a receive function. Which of the following statements is true?

My comment:

This modifier brings DoS because attacker can forcefully send ETH to the contract, for example, via selfdestruct(). In that case, this contract's balance will be nonzero and this modifier makes functions unusable.

Question 4 ✅

modifier checkedPool{
    address pool;
    assembly { 
        let size := calldatasize()
        pool := calldataload(sub(size, 32))
    }
    require(isValid(pool));
    _;
}

function isValid(pool) internal {...}
function somePoolOperation(...., address pool) public checkedPool { ... }
function anotherPoolOperation(...., address pool) public checkedPool { ... }

Developers have used assembly to make their code a bit less repetitive. They use it to annotate a bunch of functions that have as their last argument a pool address. Unfortunately they made a mistake. Which of the following options fixes the bug?

Questions 5 & 6 are based on the below code snippet. You will see the same code snippet for these two questions. The questions are below the code snippet.

Question 5 - This one tricky

interface Lender {
    function onLiquidation() external;
}

interface IERC20 {
    event Transfer(address indexed from, address indexed to, uint256 value);
    event Approval(address indexed owner, address indexed spender, uint256 value);

    function totalSupply() external view returns (uint256);
    function balanceOf(address account) external view returns (uint256);
    function transfer(address to, uint256 amount) external returns (bool);
    function allowance(address owner, address spender) external view returns (uint256);
    function approve(address spender, uint256 amount) external returns (bool);
    function transferFrom(address from, address to, uint256 amount) external returns (bool);
}

contract ERC20Collateral {
    // This contract is different from the one in Questions 1 & 2, please read it carefully!!!
    // This is a contract that's part of a larger system implementing a lending protocol

    // A list of all the addresses lending
    address[] lenders;
    // A mapping to allow efficient is lender checks
    mapping(address => bool) isLender;

    address immutable lendingPlatform = msg.sender;
    IERC20 token;

    // We use a mapping to store the deposits of all lenders
    mapping (address => uint256) balance;

    event Liquidation(address indexed lender, uint256 liquidatedAmount);

    constructor(IERC20 _token) {
        // Consider this contract is now part of a new permissionless factory
        // built by the protocol. The factory behaves very much like a UniswapV2 factory
        // that allows anyone to deploy their own collateral contract
        token = _token;
    }

    function deposit(uint amount) external {
        isLender[msg.sender] = true;
        lenders.push(msg.sender);

        token.transferFrom(msg.sender, lendingPlatform, amount);
        balance[msg.sender] += amount;
    }

    function liquidate(address lender) external {
        // We call the protocol factory to check for under-collateralization conditions
        require(lendingPlatform.undercollateralized(lender, balance[lender]));

        uint256 oldDeposit = balance[lender];
        balance[lender] = 0;
        uint256 fee = oldDeposit / 1000; // fee ratio == 1/1000

        // Give the caller his liquidation execution fee
        token.transferFrom(address(this), msg.sender, fee);
        // Transfer the rest of the collateral to the platform
        token.transferFrom(address(this), lendingPlatform, oldDeposit - fee);

        // Now ping the liquidated lender for him to be able to react to the liquidation
        // We need to use a low-level call because the lender might not be a contract
        // and the compiler checks code size on high-level calls, reverting if it's 0
        address(lender).call(abi.encodePacked(Lender.onLiquidation.selector));

        emit Liquidation(lender, oldDeposit - balance[lender]);
    }
}

The lending protocol has also built in a liquidation function to be called in the case of under-collateralization. Anyone can call the function and be rewarded for calling it by taking a small percentage of the liquidation. The liquidation function has a vulnerability which can be exploited because:

Comment:

At first the code might look like the checks-effects-interactions pattern is followed (ie. no harmful reentrancy is possible) but there's actually another check happening when the Liquidation event is emitted: If the current balance is suddenly larger than the oldDeposit. Since the lender is called before this check happens, they could reenter via the deposit() function and increase the balance causing the liquidation to fail (ie. potentially making the position "unliquidatable").

Aside from answer B, the other options are mostly nonsensical decoys.

Question 6 ✅

Assume that the vulnerability referenced in the previous question has been fixed by changing the line with the Liquidation event emission to emit Liquidation(lender, oldDeposit). The protocol team has built a bot that monitors and liquidates under-collateralized positions automatically. Even though the bot does not monitor the mempool, it simulates the full transaction and, if successful, sends transactions with the exact amount to be able to execute the function + 100000 gas for minimal execution in the onLiquidation() callback. Which of these attacks can be executed in a harmful way towards the protocol?

Comment:

First option is nonsensical.

Although the revert via reentrancy in the deposit() function has been fixed, it's still possible that the bot is simply frontrun by a lender who increases their collateral via deposit() just in time to make the bot's liquidation attempt fail.

A liquidated lender could, when called, only use up all of the gas it was given via the CALL, which is 63/64 of the total gas. With a sufficiently high gas limit it is still possible to liquidate the lender.

Gas tokenization is no longer viable since EIP-3529 has reduced refunds.

Question 7 ✅

In the context of Questions 5 and 6, someone built a MEV frontrunner bot that is exploiting liquidations in different protocols. It monitors the mempool for collateral contracts deployed from the lending factory and simulates transactions in a mainnet fork within Foundry to check whether it should attack them. The logic behind the bot is that it checks only the token’s “Transfer” events for its success conditions. More precisely, it checks if there is liquidity in an AMM to exchange to ETH and make sure it turns a profit at the end. If so, it sends a Flashbot bundle to make a profit by frontrunning the liquidator. Knowing the factory for this new contract is permissionless, how could you extract assets out of this bot?

Comment:

Griefing the bot would not extract assets from it.

Option C actually happened on mainnet and was labelled "Salmonella Attack"

Since it's using Flashbot Bundles, frontrunning it should not be possible since the transaction would be private.

Question 8 ✅

// Assume as adding to the code shown for Questions 5 & 6
contract ERC20Collateral {
    // This is a contract that's part of a larger system implementing a lending protocol

    ...

    function transferCollateral(
        address signer,
        address receiver,
        uint256 amount,
        bytes32 sigR,
        bytes32 sigS,
        uint8 sigV
    ) external {
        require(signer != address(0), "INVALID_SIGNER");

        // Check that the signer is the one who actually signed the message
        require(signer == ecrecover(
            keccak256(abi.encodePacked(receiver, amount)),
            sigV,
            sigR,
            sigS
        ));

        deposits[receiver] += amount;
        deposits[signer] -= amount;
    }

    ...
}

The protocol implemented a function to transfer collateral from lender A to lender B with a signature from A, as shown above. Is there a way you can break it?

Comment:

There's nothing preventing the same signature to be re-used over and over again. So as long as the signer has a balance higher than the signed amount, the receiver can transfer their collateral.

Even if the code would keep track of the signatures that were already used once, the code would still be exploitable via signature malleability. A correct way to fix it would be to track a nonce for each signer.

A malformed signature would cause ecrecover to return a zero-address, but is prevented since the return value must be equal to the signer who may not be the zero-address.

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