Party DAO - kaveyjoe's results

Introduction

Party Protocol is an open protocol for on-chain group coordination. It provides on-chain functionality for group formation, coordination, and distribution, with the goal of making Ethereum multiplayer.

Party Protocol is built on three core pillars:

• On-chain coordination: Party Protocol allows groups to coordinate their actions on-chain, without the need for a trusted intermediary. This is achieved through the use of smart contracts and a decentralized voting system.
• Crowdfunding: Party Protocol provides crowdfund contracts that allow groups to pool their funds together to purchase NFTs or other assets. This makes it easier for groups to coordinate their purchases and gain access to exclusive items.
• Distribution: Party Protocol provides a variety of distribution mechanisms that allow groups to distribute their assets to members in a fair and transparent way. This includes mechanisms for distributing royalties, dividends, and other forms of income.

Contract Overview

1 . InitialETHCrowdfund.sol

InitialETHCrowdfund contract is a crowdfund contract for raising initial funds for new parties. It includes features such as contribution, batch contribution, refund, and batch refund. It also interacts with several external contracts such as ETHCrowdfundBase, ProposalStorage, Party, Crowdfund, and IGateKeeper.

2 . crowdfund/ETHCrowdfundBase.sol

ETHCrowdfundBase contract is a comprehensive smart contract designed for managing Ethereum-based crowdfunding campaigns. It includes features such as setting minimum and maximum contribution limits, defining a lifecycle for the crowdfunding campaign, splitting funds between the campaign and a separate recipient, and an emergency execution function for the contract owner.

3 . PartyGovernance.sol

The PartyGovernance.sol contract implements the governance functionality for Party Protocol. It allows party members to create and vote on proposals, as well as execute approved proposals. It uses a ProposalExecutionEngine to execute arbitrary calls on behalf of the party, and supports a variety of proposal types, including arbitrary calls proposals, fractionalize proposals, list on Opensea proposals, and list on Zora proposals. Party members can vote on proposals using Party Governance NFTs, which they receive by contributing to the party during the crowdfunding phase.

4 . PartyGovernanceNFT.sol

PartyGovernanceNFT is an ERC721 token contract that is built on top of PartyGovernance. The contract uses OpenZeppelin's IERC2981 interface for royalty management. It also uses several utility libraries such as LibSafeCast, LibAddress, and LibERC20Compat. The contract has a governance mechanism where certain addresses are given authority to perform specific actions such as minting tokens, updating voting power, and setting the rage quit timestamp.

5 . ProposalExecutionEngine.sol ProposalExecutionEngine contract is an upgradable implementation of proposal execution logic for parties that use it. It is designed to be used with a proxy contract that delegate calls to it. The contract supports various types of proposals such as ListOnOpenseaProposal, ListOnZoraProposal, FractionalizeProposal, ArbitraryCallsProposal, etc. The contract provides several key functions for initializing, executing, and cancelling proposals, as well as checking the validity of signatures.

6 . ProposalStorage.sol ProposalStorage contract is an abstract contract that provides a storage structure for proposals in a decentralized governance system. It uses a pattern of explicit storage buckets, which is a way to manage and isolate contract storage in a more explicit and controlled manner. The contract defines several structures and functions to manage the governance parameters and proposal engine options.

7 . SetGovernanceParameterProposal.sol SetGovernanceParameterProposal is a part of a decentralized governance system. It allows for the modification of certain governance parameters, specifically voteDuration, executionDelay, and passThresholdBps. The contract includes checks to ensure that the new values for these parameters are within acceptable ranges, and it emits events when these values are changed.

8 . SetSignatureValidatorProposal.sol

SetSignatureValidatorProposal contract is designed to manage and validate ERC1271 signatures. ERC1271 is a standard for verifying signatures on-chain, which is useful for smart contracts that need to verify off-chain signatures. The contract allows for setting a signature validator for a given hash and retrieving the validator for a given hash.

9 . OffChainSignatureValidator.sol

OffChainSignatureValidator implements the IERC1271 interface. The contract is designed to validate off-chain signatures for parties. It includes functionality to set a signing threshold for each party and to validate signatures based on the signer's voting power within the party. The contract uses OpenZeppelin's Strings library and a custom Party contract.

10 . Implementation.sol

Implementation contract is designed to be delegatecalled into by other contracts. It includes a constructor that sets the implementation address to the contract's own address, and two modifiers: onlyDelegateCall and onlyInitialize. The onlyDelegateCall modifier ensures that the function it is attached to can only be called in a delegatecall context, while the onlyInitialize modifier ensures that the function it is attached to can only be called once. The contract also includes a function IMPL() that returns the implementation address.

Centralization Risks

• The initializer function initialize can only be called once during deployment, and it sets up critical parameters, including the gateKeeper. If an adversary gains control over the deployer's private key or compromises the deployment process, they could influence the gatekeeper or other critical parameters.
• The authorities list, used in creating the party, includes the deployer's address (address(this)). The deployer has a special role within the contract, potentially concentrating power in the hands of a single entity. -The OnlyPartyHostError modifier allows only the party host to finalize the crowdfund early. This centralizes authority in the hands of the host, which could be a risk if the host acts maliciously or becomes compromised.
• The emergencyExecute function allows the DAO to execute arbitrary functions, potentially including critical operations. If the DAO address is compromised, it poses a significant risk to the crowdfund.
• The _delegateToRenderer function calls an external contract to delegate certain functionality. If this external contract becomes unavailable or compromised, it can result in a single point of failure for the entire system.
• The _assertAuthority modifier and related functions enforce a specific ownership and control structure. If this ownership structure is not decentralized or if the authorities are compromised, it can lead to governance issues.
• The isValidSignature function has logic for signature validation. If the choice of the signature validator is centrally controlled, it can lead to centralization of signature verification.
• upgradable mechanism (_initProposalImpl) that allows changing the implementation of the IProposalExecutionEngine. If the upgrade process is controlled by a centralized entity, it introduces centralization risks.

Systematic Risks

• Incorrectly configured exchange rates or funding split parameters may lead to unexpected results and financial losses. Ensure these parameters are set correctly and follow best practices.
• The use of block.timestamp for time calculations assumes that miners will timestamp blocks correctly. This could be manipulated by miners to some extent, and reliance on it for critical decisions should be done cautiously.
• The rageQuit function uses a reentrancy guard (rageQuitTimestamp) to prevent reentrancy attacks. However, any oversight in the implementation might expose the contract to reentrancy vulnerabilities.
• The minting functions (mint, increaseVotingPower, decreaseVotingPower) should be carefully monitored for potential gas limit issues, especially as the number of authorities and minting requests increases. Gas limits might be exceeded during minting, causing transactions to fail.
• The authorization checks in various functions (e.g., burn, abdicateAuthority, etc.) need to be robust to prevent unauthorized access. Any lapses in these checks could lead to unauthorized actions, impacting the integrity of the system.

Codebase Quality Analysis

• Modularity: The codebase is organized into distinct contracts, each handling specific functionalities. This modular approach promotes code readability and maintainability.

• Documentation: Each contract is accompanied by clear explanations of its purpose and functionality. This aids developers in understanding the code and its intended use.

• Use of Libraries: The project leverages established libraries like OpenZeppelin's IERC2981 and utility libraries such as LibSafeCast, LibAddress, and LibERC20Compat. This promotes code reuse and reduces the likelihood of implementation errors.

• Governance Mechanism: The governance system implemented in PartyGovernanceNFT.sol provides a structured way for party members to participate in decision-making, enhancing the protocol's democratic nature.

Recommendation

• Implement multi-signature setups for critical functions, especially those related to the initializer function during deployment. This mitigates risks associated with compromised private keys.
• Reevaluate the inclusion of the deployer in the authorities list and assess the necessity of this central role. Aim for a more decentralized approach to distribute authority within the protocol.
• Explore options to distribute governance authority beyond a single entity, especially in functions like OnlyPartyHostError and emergencyExecute. This helps prevent concentration of power and reduces the risk of malicious actions.
• Mitigate the risk associated with external contract dependency in the _delegateToRenderer function. Consider fallback mechanisms or alternative solutions to minimize the impact of external contract failures.
• Reevaluate the upgradable mechanism (_initProposalImpl) to ensure decentralization in the upgrade process. Involve the community in decision-making to minimize centralization risks.
• Keep the documentation up to date, reflecting any changes made to the codebase. Clear and accurate documentation is essential for developers and auditors to understand the protocol's functionality.

Learning and Insights

Performing an audit on the Party Protocol codebase has been an invaluable learning experience, providing significant insights into enhancing codebase skills related to decentralized applications (DApps) and smart contract development. The audit process has contributed to my understanding in several key areas:

Modular Design and Documentation:

• The importance of a modular design in smart contracts, as demonstrated by the Party Protocol, has been underscored. The clear separation of concerns and distinct functionalities within individual contracts enhances code readability and maintainability.
• Understanding the necessity of comprehensive documentation for each contract. This not only aids in grasping the intent behind the code but also facilitates easier collaboration among developers.

Governance Systems and Token Contracts:

• Insight into implementing governance systems within DApps, as evidenced by the PartyGovernance.sol and PartyGovernanceNFT.sol contracts. The governance mechanism, involving proposal creation, voting, and execution, adds a layer of transparency and decentralization to decision-making.
• Learning about the integration of ERC721 tokens (PartyGovernanceNFT.sol) and the utilization of OpenZeppelin's IERC2981 interface for royalty management. This experience broadens my understanding of token-based functionalities within decentralized ecosystems.

Centralization and Security Concerns:

• Recognizing potential centralization risks and security concerns within smart contracts, such as those identified in the Party Protocol. This has emphasized the importance of robust deployment processes, decentralized ownership structures, and careful consideration of authority concentrations.
• Gaining insights into mitigating risks associated with external dependencies, emergency execution functions, and upgradable mechanisms, highlighting the need for a resilient and secure smart contract architecture.

Systematic Risks and Best Practices:

• Understanding systematic risks related to configuration parameters, timestamp manipulations, and potential vulnerabilities, such as reentrancy issues. This awareness emphasizes the significance of thorough testing, proper parameter configurations, and adherence to best practices in smart contract development.
• Learning about potential challenges associated with gas limits, authorization checks, and the dynamic nature of DApp environments. This insight guides the implementation of gas-efficient solutions and robust access controls.

Continuous Improvement and Community Involvement:

• Recognizing the iterative nature of smart contract development and the importance of continuous improvement. The audit process has instilled the idea that auditing is not a one-time task but a continual effort to enhance the security and reliability of the codebase.
• Understanding the value of community involvement in the upgrade process, particularly in governance and upgradable mechanisms. This insight fosters a collaborative approach to decision-making and codebase evolution.

Conclusion

The Party Protocol demonstrates a thoughtful design for on-chain group coordination, but addressing the identified centralization and systematic risks is crucial for ensuring the protocol's security and resilience. Conducting thorough audits, implementing additional security measures, and fostering decentralization in governance and control structures will contribute to the overall robustness of the Party Protocol.

Time spent:

33 hours