Reservoir - FortunaFi

Prepared by:

HALBORN

Last Updated 08/21/2024

Date of Engagement by: May 13th, 2024 - May 31st, 2024

Summary

100% of all REPORTED Findings have been addressed

All findings

Critical

High

Medium

Low

Informational

1. Introduction
2. Assessment summary
3. Test approach and methodology
4. Risk methodology
5. Scope
6. Assessment summary & findings overview
7. Findings & Tech Details

7.1 Use of deprecated chainlink's latestanswer() function
7.2 Use of deprecated third-party libraries

8. Automated Testing

1. Introduction

FortunaFi engaged Halborn to conduct a security assessment of their Reservoir Protocol beginning on May 13th and ending on May 31st. The security assessment was scoped to the smart contracts provided in the FortunaFi's GitHub repository. Commit hash and further details can be found in the Scope section of this report.

In Reservoir Protocol users can purchase the native stablecoin rUSD and exchange it for yield-bearing tokens trUSD (fixed term) or srUSD (Liquid Yield). The protocol's liabilities are backed by a combination of real-world assets (RWAs) and on-chain yield-bearing assets in lending protocols and Automated Market Makers (AMMs).

Asset allocation is fully configurable through governance, which also sets solvency ratios to control system leverage, ensuring financial stability.

2. Assessment Summary

Halborn was provided around three weeks for the engagement and assigned one full-time security engineer to review the security of the smart contract in scope. The engineer is a blockchain and smart contract security expert with advanced penetration testing and smart contract hacking skills, and deep knowledge of multiple blockchain protocols.

The purpose of the assessment is to:

Identify potential security issues within the smart contracts in scope.
Ensure that smart contract functionality operates as intended.

In summary, Halborn identified some security recommendations that were mostly addressed by the FortunaFi team.

Halborn's informational findings and their descriptions and remediations have been redacted at the request of FortunaFi.

3. Test Approach and Methodology

Halborn performed a combination of manual and automated security testing to balance efficiency, timeliness, practicality, and accuracy in regard to the scope of this assessment. While manual testing is recommended to uncover flaws in logic, process, and implementation; automated testing techniques help enhance coverage of the code and can quickly identify items that do not follow the security best practices. The following phases and associated tools were used during the assessment:

Research into architecture and purpose.
Smart contract manual code review and walkthrough.
Graphing out functionality and contract logic/connectivity/functions (solgraph).
Manual assessment of use and safety for the critical Solidity variables and functions in scope to identify any arithmetic-related vulnerability classes.
Manual testing by custom scripts.
Static Analysis of security for scoped contracts (slither, aderyn and 4naly3er).
Symbolic Analysis (Halmos).

4. RISK METHODOLOGY

Every vulnerability and issue observed by Halborn is ranked based on two sets of Metrics and a Severity Coefficient. This system is inspired by the industry standard Common Vulnerability Scoring System.

The two Metric sets are: Exploitability and Impact. Exploitability captures the ease and technical means by which vulnerabilities can be exploited and Impact describes the consequences of a successful exploit.

The Severity Coefficients is designed to further refine the accuracy of the ranking with two factors: Reversibility and Scope. These capture the impact of the vulnerability on the environment as well as the number of users and smart contracts affected.

The final score is a value between 0-10 rounded up to 1 decimal place and 10 corresponding to the highest security risk. This provides an objective and accurate rating of the severity of security vulnerabilities in smart contracts.

The system is designed to assist in identifying and prioritizing vulnerabilities based on their level of risk to address the most critical issues in a timely manner.

4.1 EXPLOITABILITY

Attack Origin (AO):

Captures whether the attack requires compromising a specific account.

Attack Cost (AC):

Captures the cost of exploiting the vulnerability incurred by the attacker relative to sending a single transaction on the relevant blockchain. Includes but is not limited to financial and computational cost.

Attack Complexity (AX):

Describes the conditions beyond the attacker’s control that must exist in order to exploit the vulnerability. Includes but is not limited to macro situation, available third-party liquidity and regulatory challenges.

Metrics:

EXPLOITABILIY METRIC ( $m_e$ )	METRIC VALUE	NUMERICAL VALUE
Attack Origin (AO)	Arbitrary (AO:A) Specific (AO:S)	1 0.2
Attack Cost (AC)	Low (AC:L) Medium (AC:M) High (AC:H)	1 0.67 0.33
Attack Complexity (AX)	Low (AX:L) Medium (AX:M) High (AX:H)	1 0.67 0.33

Exploitability

E

is calculated using the following formula:

$E = \prod m_e$

4.2 IMPACT

Confidentiality (C):

Measures the impact to the confidentiality of the information resources managed by the contract due to a successfully exploited vulnerability. Confidentiality refers to limiting access to authorized users only.

Integrity (I):

Measures the impact to integrity of a successfully exploited vulnerability. Integrity refers to the trustworthiness and veracity of data stored and/or processed on-chain. Integrity impact directly affecting Deposit or Yield records is excluded.

Availability (A):

Measures the impact to the availability of the impacted component resulting from a successfully exploited vulnerability. This metric refers to smart contract features and functionality, not state. Availability impact directly affecting Deposit or Yield is excluded.

Deposit (D):

Measures the impact to the deposits made to the contract by either users or owners.

Yield (Y):

Measures the impact to the yield generated by the contract for either users or owners.

Metrics:

IMPACT METRIC ( $m_I$ )	METRIC VALUE	NUMERICAL VALUE
Confidentiality (C)	None (I:N) Low (I:L) Medium (I:M) High (I:H) Critical (I:C)	0 0.25 0.5 0.75 1
Integrity (I)	None (I:N) Low (I:L) Medium (I:M) High (I:H) Critical (I:C)	0 0.25 0.5 0.75 1
Availability (A)	None (A:N) Low (A:L) Medium (A:M) High (A:H) Critical (A:C)	0 0.25 0.5 0.75 1
Deposit (D)	None (D:N) Low (D:L) Medium (D:M) High (D:H) Critical (D:C)	0 0.25 0.5 0.75 1
Yield (Y)	None (Y:N) Low (Y:L) Medium (Y:M) High (Y:H) Critical (Y:C)	0 0.25 0.5 0.75 1

Impact

I

is calculated using the following formula:

$I = max(m_I) + \frac{\sum{m_I} - max(m_I)}{4}$

4.3 SEVERITY COEFFICIENT

Reversibility (R):

Describes the share of the exploited vulnerability effects that can be reversed. For upgradeable contracts, assume the contract private key is available.

Scope (S):

Captures whether a vulnerability in one vulnerable contract impacts resources in other contracts.

Metrics:

SEVERITY COEFFICIENT ( $C$ )	COEFFICIENT VALUE	NUMERICAL VALUE
Reversibility ( $r$ )	None (R:N) Partial (R:P) Full (R:F)	1 0.5 0.25
Scope ( $s$ )	Changed (S:C) Unchanged (S:U)	1.25 1

Severity Coefficient

C

is obtained by the following product:

$C = rs$

The Vulnerability Severity Score

S

is obtained by:

$S = min(10, EIC * 10)$

The score is rounded up to 1 decimal places.

Severity	Score Value Range
Critical	9 - 10
High	7 - 8.9
Medium	4.5 - 6.9
Low	2 - 4.4
Informational	0 - 1.9

5. SCOPE

Files and Repository

(a) Repository: reservoir

(b) Assessed Commit ID: 3adfc9b

src/adapters/AssetAdapter.sol
src/functions/TermCalculator.sol
src/AccountManager.sol

↓ Expand ↓

Out-of-Scope: Third party dependencies., Economic attacks.

Remediation Commit ID:

08ac0f5

Out-of-Scope: New features/implementations after the remediation commit IDs.

6. Assessment Summary & Findings Overview

Critical

High

Medium

Low

Informational

Security analysis	Risk level	Remediation Date
Use of Deprecated Chainlink's latestAnswer() Function	Medium	Solved - 06/15/2024
Use of Deprecated Third-Party Libraries	Low	Acknowledged

7. Findings & Tech Details

7.1 Use of Deprecated Chainlink's latestAnswer() Function

// Medium

Description

In the contracts AssetAdapter and PegStabilityModule, the deprecated latestAnswer() function is used to retrieve prices from Chainlink:

function _underlyingPriceOracleLatestAnswer()
  private
  view
  returns (uint256)
  {
    int256 latestAnswer = underlyingPriceOracle.latestAnswer();

    return latestAnswer > 0 ? uint256(latestAnswer) : 0;
}

function _fundPriceOracleLatestAnswer() private view returns (uint256) {
    int256 latestAnswer = fundPriceOracle.latestAnswer();

    return latestAnswer > 0 ? uint256(latestAnswer) : 0;
}

According to Chainlink’s documentation (API Reference), the latestAnswer function is deprecated. This function does not throw an error if no answer has been reached, but instead returns 0, possibly causing an incorrect price to be fed to the different price feeds or even a Denial of Service by a division by zero.

BVSS

AO:A/AC:L/AX:L/C:N/I:N/A:N/D:M/Y:N/R:N/S:U (5.0)

Recommendation

Consider implementing the latestRoundData() method and improving logic to take advantage of its improved features.

Remediation plan

SOLVED: The FortunaFi team implemented a wraper of the Chainlink's method latestRoundData which is the safer and recommended one.

Remediation Hash

https://github.com/fortunafi/reservoir/commit/08ac0f59cdc6a73f5027ec08628283e40981b825

7.2 Use of Deprecated Third-Party Libraries

// Low

Description

The codebase utilizes two outdated third-party libraries, which could pose security and maintenance risks. Specifically:

The library chainlink version 1.11.0 is being used. The latest version available for the 1.x.x branch is 1.13.3 (from mid-2023) and, for the 2.x.x is 2.11.0.
The library openzeppelin-contracts version 4.8.1 is in use.

BVSS

AO:A/AC:L/AX:L/C:N/I:L/A:L/D:N/Y:N/R:N/S:U (3.1)

Recommendation

Consider updating the libraries in use to the latest stable version available.

Remediation plan

ACKNOWLEDGED: The FortunaFi team acknowledges that Chainlink 1.11.0 and openzeppelin-contracts 4.8.1 are not the latest versions and intentionally use them as they have been more tested by the community than newer versions.

8. Automated Testing

Halborn used automated testing techniques to enhance the coverage of certain areas of the smart contract in scope. Among the tools used was Slither, a Solidity static analysis framework. After Halborn verified the smart contract in the repository and was able to compile it correctly into their ABI and binary format, Slither was run against the contract. This tool can statically verify mathematical relationships between Solidity variables to detect invalid or inconsistent usage of the contract's API across the entire code-base.

The security team assessed all findings identified by the Slither software, and findings with severity Information and Optimization are excluded in the below results.

Halborn strongly recommends conducting a follow-up assessment of the project either within six months or immediately following any material changes to the codebase, whichever comes first. This approach is crucial for maintaining the project’s integrity and addressing potential vulnerabilities introduced by code modifications.

1. Introduction
2. Assessment summary
3. Test approach and methodology
4. Risk methodology
5. Scope
6. Assessment summary & findings overview
7. Findings & Tech Details

Reservoir

FortunaFi

Table of Contents

1. Introduction

2. Assessment Summary

3. Test Approach and Methodology

4. RISK METHODOLOGY

4.1 EXPLOITABILITY

Attack Origin (AO):

Attack Cost (AC):

Attack Complexity (AX):

Metrics:

4.2 IMPACT

Confidentiality (C):

Integrity (I):

Availability (A):

Deposit (D):

Yield (Y):

Metrics:

4.3 SEVERITY COEFFICIENT

Reversibility (R):

Scope (S):

Metrics:

5. SCOPE

6. Assessment Summary & Findings Overview

7. Findings & Tech Details

7.1 Use of Deprecated Chainlink's latestAnswer() Function

Description

BVSS

Recommendation

Remediation plan

Remediation Hash

7.2 Use of Deprecated Third-Party Libraries

Description

BVSS

Recommendation

Remediation plan

8. Automated Testing

Table of Contents