blockdev - Rebalancing is open to flashloan attack

[sherlock-admin]

blockdev

high

Rebalancing is open to flashloan attack

Summary

Rebalancing begins by fetching USSD's spot price relative to DAI from its Uniswap pool. Anyone can imbalance the pool through a flash loan before rebalancing begins which leads to a wrong USSD price. This results in incorrect rebalancing, even more so because of the fact that rebalance() function can be called by anyone.

Vulnerability Detail

rebalance() calls getOwnValuation() to determine USSD price relative to DAI:

function getOwnValuation() public view returns (uint256 price) {
  (uint160 sqrtPriceX96,,,,,,) =  uniPool.slot0();
  if(uniPool.token0() == USSD) {
    price = uint(sqrtPriceX96)*(uint(sqrtPriceX96))/(1e6) >> (96 * 2);
  } else {
    price = uint(sqrtPriceX96)*(uint(sqrtPriceX96))*(1e18 /* 1e12 + 1e6 decimal representation */) >> (96 * 2);
    // flip the fraction
    price = (1e24 / price) / 1e12;
  }
}

uniPool.slot() returns the spot price's square root which is susceptible to flash loan attack as explained above.

Impact

High. Almost all rebalancing transactions will result in loss for the protocol.

Code Snippet

function getOwnValuation() public view returns (uint256 price) {
  (uint160 sqrtPriceX96,,,,,,) =  uniPool.slot0();
  if(uniPool.token0() == USSD) {
    price = uint(sqrtPriceX96)*(uint(sqrtPriceX96))/(1e6) >> (96 * 2);
  } else {
    price = uint(sqrtPriceX96)*(uint(sqrtPriceX96))*(1e18 /* 1e12 + 1e6 decimal representation */) >> (96 * 2);
    // flip the fraction
    price = (1e24 / price) / 1e12;
  }
}

Tool used

Manual Review

Recommendation

Use a TWAP price which will result in inaccurate price (due to being an average over time) but more resistant towards price manipulation.

Duplicate of #451