ParaSpace contest - R2's results

Lines of code

https://github.com/code-423n4/2022-11-paraspace/blob/c6820a279c64a299a783955749fdc977de8f0449/paraspace-core/contracts/misc/ParaSpaceOracle.sol#L131 https://github.com/code-423n4/2022-11-paraspace/blob/c6820a279c64a299a783955749fdc977de8f0449/paraspace-core/contracts/misc/ParaSpaceFallbackOracle.sol#L49

Vulnerability details

Impact

In ParaSpaceOracle.getAssetPrice() there are some cases when you use _fallbackOracle to calculate the asset price. But in ParaSpaceFallbackOracle you calculate instant UniswapV2 pool price depends on pool reserves. This price may be manipulated in the transaction using flash loans.

And you use ParaSpaceOracle.getAssetPrice() in many crucial protocol parts like a liquidation validation or borrowing validation

So malicious user can manipulate asset price and

• borrow more tokens than should be allowed
• liquidate users, manipulating there assets prices

Proof of Concept

Let's describe how malicious user can borrow more tokens than it should be by manipulating asset price Let's imagine for DAI you don't have assetsSources[DAI] and use fallback oracle

1. Alice has HF 1.1 (she use WETH as collateral and borrowed DAI)
2. Bob has contract with the next function:

function attack() external {
   GetFlashLoan(WETH) - lets imagine now 1 WETH == 1000 DAI
   ExchangeWETHToDAIUniswap() - now DAI price will increase, lets imagine to 1 WETH == 2000 DAI
   LiquidateAlice() - now Alice's HF becomes below 1, so Bob can liquidate Alice and many other users
   RepayFlashLoan() - repay using liquidation rewards
}

It may be done even without flash loans - in separate transactions (risky for attacker)

Tools Used

vs code

Recommended Mitigation Steps

Use Uniswap TWAP prices - they are less susceptible to manipulation