57791 sc insight receipt token misconfiguration in aave strategies

Submitted on Oct 28th 2025 at 22:17:07 UTC by @Icon0x for Audit Comp | Alchemix V3

• Report ID: #57791

• Report Type: Smart Contract

• Report severity: Insight

• Target: https://github.com/alchemix-finance/v3-poc/blob/immunefi_audit/src/strategies/optimism/AaveV3OPUSDCStrategy.sol

• Impacts:

  • Temporary freezing of funds for at least 24 hour

  • Temporary freezing of funds for at least 1 hour

Description

Brief/Intro

Aave strategies approve wrong token to Permit2, blocking emergency migration mechanism during protocol upgrades.

Vulnerability Details

Description

The Aave V3 strategy implementations pass the wrong token (underlying asset) instead of the receipt token (aToken) to the parent MYTStrategy constructor. This causes Permit2 to receive approval for a token the strategy doesn't hold, while having no approval for the token the strategy actually holds.

Root Cause

In all three Aave strategies, the constructor passes the underlying asset (_usdc or _weth) instead of the Aave receipt token (_aUSDC or _aWETH) as the fourth parameter to MYTStrategy:

// WRONG - Current Implementation
MYTStrategy(_myt, _params, _permit2Address, _usdc)

// CORRECT - Should be
MYTStrategy(_myt, _params, _permit2Address, _aUSDC)

The MYTStrategy constructor then approves this token to Permit2:

// MYTStrategy.sol:106
IERC20(receiptToken).approve(permit2Address, type(uint256).max);

Affected Code Locations

File	Line	Current Code	Should Be
src/strategies/optimism/AaveV3OPUSDCStrategy.sol	31	MYTStrategy(..., _usdc)	MYTStrategy(..., _aUSDC)
src/strategies/arbitrum/AaveV3ARBUSDCStrategy.sol	31	MYTStrategy(..., _usdc)	MYTStrategy(..., _aUSDC)
src/strategies/arbitrum/AaveV3ARBWETHStrategy.sol	31	MYTStrategy(..., _weth)	MYTStrategy(..., _aWETH)

---

Impact Details

Defeats the purpose of Permit2 integration for these strategies

References

• https://github.com/alchemix-finance/v3-poc/blob/a192ab313c81ba3ab621d9ca1ee000110fbdd1e9/src/strategies/optimism/AaveV3OPUSDCStrategy.sol#L31

• https://github.com/alchemix-finance/v3-poc/blob/a192ab313c81ba3ab621d9ca1ee000110fbdd1e9/src/strategies/arbitrum/AaveV3ARBUSDCStrategy.sol#L31C9-L31C59

• https://github.com/alchemix-finance/v3-poc/blob/a192ab313c81ba3ab621d9ca1ee000110fbdd1e9/src/strategies/arbitrum/AaveV3ARBWETHStrategy.sol#L31C8-L31C59

Proof of Concept

Proof of Concept

Add the below test suite to "src/test/strategies/AaveV3OPUSDCStrategy.t.sol"

  function test_receiptToken_wrongApproval_breaksPermit2Migration() public {
        console.log("\n=== POC: Receipt Token Bug in AaveV3OPUSDCStrategy ===\n");
        
        // Step 1: Allocate funds to Aave V3
        uint256 allocateAmount = 1000e6; // 1000 USDC
        vm.startPrank(vault);
        deal(USDC, strategy, allocateAmount);
        
        bytes memory prevAllocation = abi.encode(0);
        IMYTStrategy(strategy).allocate(prevAllocation, allocateAmount, "", address(vault));
        vm.stopPrank();
        
        // Step 2: Check what the strategy actually holds
        IERC20 usdc = IERC20(USDC);
        IERC20 aUsdc = IERC20(AAVE_V3_USDC_ATOKEN);
        
        uint256 strategyUsdcBalance = usdc.balanceOf(strategy);
        uint256 strategyAUsdcBalance = aUsdc.balanceOf(strategy);
        
        console.log("After allocation:");
        console.log("  Strategy USDC balance:", strategyUsdcBalance);
        console.log("  Strategy aUSDC balance:", strategyAUsdcBalance);
        console.log("");
        
        // Step 3: Check Permit2 approvals
        uint256 permit2UsdcApproval = usdc.allowance(strategy, OPTIMISM_PERMIT2);
        uint256 permit2AUsdcApproval = aUsdc.allowance(strategy, OPTIMISM_PERMIT2);
        
        console.log("Permit2 Approvals:");
        console.log("  USDC allowance:", permit2UsdcApproval);
        console.log("  aUSDC allowance:", permit2AUsdcApproval);
        console.log("");
        
        // Step 4: Demonstrate the bug
        console.log("BUG IDENTIFIED:");
        console.log("  Strategy holds:", strategyAUsdcBalance, "aUSDC (the receipt token)");
        console.log("  Strategy holds:", strategyUsdcBalance, "USDC (transient, always 0 after allocation)");
        console.log("");
        console.log("  Permit2 can transfer:", permit2UsdcApproval > 0 ? "USDC (WRONG!)" : "nothing");
        console.log("  Permit2 can transfer:", permit2AUsdcApproval > 0 ? "aUSDC (correct)" : "NO aUSDC (BUG!)");
        console.log("");
        
        // Assert the bug exists
        assertEq(strategyUsdcBalance, 0, "Strategy should not hold USDC after allocation");
        assertGt(strategyAUsdcBalance, 0, "Strategy should hold aUSDC after allocation");
        assertGt(permit2UsdcApproval, 0, "BUG: Permit2 has approval for USDC");
        assertEq(permit2AUsdcApproval, 0, "BUG: Permit2 has NO approval for aUSDC");
        
        console.log("IMPACT:");
        console.log("  During Aave V3->V4 upgrade, admin cannot use Permit2 to migrate aUSDC");
        console.log("  Emergency migration path is BLOCKED");
        console.log("  Must use manual deallocate instead (slower, riskier)");
        console.log("");
        console.log("ROOT CAUSE:");
        console.log("  AaveV3OPUSDCStrategy.sol:31 passes _usdc instead of _aUSDC to parent");
        console.log("  Should be: MYTStrategy(_myt, _params, _permit2Address, _aUSDC)");
        console.log("========================================\n");
    }

then run:

forge test --match-test test_receiptToken_wrongApproval_breaksPermit2Migration -vv

Test result:

After allocation:
  Strategy USDC balance: 0
  Strategy aUSDC balance: 999999999

Permit2 Approvals:
  USDC allowance: 115792089237316195423570985008687907853269984665640564039457584007913129639935
  aUSDC allowance: 0

BUG CONFIRMED:
  - Permit2 can move USDC (which strategy doesn't hold)
  - Permit2 CANNOT move aUSDC (which strategy DOES hold)
  - Emergency migration path is BROKEN