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Compound III Audit

OpenZeppelin Security | July 20, 2022

Delivered to Compound on June 14th, 2022. Fix updates will be added to this document periodically.

This security assessment was prepared by OpenZeppelin, protecting the open economy.

Table of Contents

Summary

As part of OpenZeppelin’s Security Partnership with the Compound DAO, we have audited a new upcoming version of the Compound lending protocol developed by Compound Labs: “Compound III”, codenamed Comet in this report. This new version will only contain one base asset and can have multiple instances deployed on Ethereum Mainnet and other EVM-compatible networks.

Type
DeFi Lending
Timeline
From 2022-05-13 To 2022-06-14
Languages
Solidity

Scope

We audited the compound-finance/comet repository at the 0f1221967149115f50a09681eea9580879ee7720 commit.

In scope were the following contracts:

- Comet.sol
- Bulker.sol
- CometConfiguration.sol
- CometCore.sol
- CometExt.sol
- CometExtInterface.sol
- CometFactory.sol
- CometInterface.sol
- CometMainInterface.sol
- CometMath.sol
- CometProxyAdmin.sol
- CometRewards.sol
- CometStorage.sol
- Configurator.sol
- ConfiguratorStorage.sol
- ERC20.sol
- IWETH9.sol
- TransparentUpgradeableConfiguratorProxy.sol
- vendor/
    - access/
        - Ownable.sol
    - canonical-weth/
        - contracts/WETH9.sol
    - @chainlink/
        - contracts/src/v0.8/interfaces/AggregatorV3Interface.sol
    - interfaces/
        - draft-IERC1822.sol
    - proxy/
        - Proxy.sol
        - beacon/IBeacon.sol
        - transparent/ProxyAdmin.sol
        - transparent/TransparentUpgradeableProxy.sol
        - ERC1967/ERC1967Proxy.sol
        - ERC1967/ERC1967Upgrade.sol
    - utils/
        - Context.sol
        - StorageSlot.sol
        - Address.sol

General overview

The Comet protocol is a lending protocol where there’s only one specific base asset that can be supplied and borrowed, and that accepts other assets merely as collateral for base asset borrows. The main idea is to have one or more Comet instances with different base assets potentially being deployed on different networks. The Comet contract is the core of the protocol. This contract is configured with a certain number of assets accepted as collateral and manages all deposits and borrows. It also has a fallback function that delegate calls toward the CometExt contract, an extension of Comet that defines and implements some functionalities and that will let the governance add more features to Comet instances without hitting size limits in the contracts.

Users’ supplies and borrows are tracked in each user position under the principal parameter. This parameter can be positive or negative signaling whether the user is supplying base asset or borrowing it out of the protocol. Depending on its value, the principal accrues either supply or borrow interests over time. Users might deposit collateral assets to cover their borrow and each collateral asset is configured with proper parameters such as borrow and liquidity collateral factors, the liquidation factor, its price feed, and an eventual supply cap to limit the protocol’s exposure to it. Moreover, collateral assets deposited in the protocol don’t accrue supply interests.

Suppliers of both collateral assets and the base asset can transfer or withdraw those deposits to other accounts, with the only condition to not create undercollateralized positions.

Like other lending protocols, Comet provides supply and borrow rates so that users are incentivized either to repay their borrows or supply the base asset to the protocol. These rates are managed by function curves that use two different slope parameters depending on the current interest value and the value of a kink parameter. The protocol also cuts out a certain amount of a supplier’s earned interest for the reserve. The reserve is the historical supply interest put aside and managed by the protocol itself. The protocol has a global parameter targetReserves which is meant to be an important factor in liquidations as we will see in a moment.

The Comet contract defines two conditions for a user position: – isBorrowCollateralized: will return true or false depending on whether the user liquidity is positive or not. Specifically, the liquidity is calculated as the sum between the value of the base asset deposits and the value of the collateral asset balances projected with the borrowCollateralFactor of each asset. If the liquidity happens to be greater than zero, then the user position is currently collateralized. – isLiquidatable: will return true or false if the liquidity is negative. This time the liquidity is calculated as the sum of base asset deposits and the sum of the collateral assets balances projected with the liquidateCollateralFactor.

This means that there’s also a third state, where a user position might be under collateralized but not liquidatable. This is given by the spread between borrowCollateralFactor and liquidateCollateralFactor. Notice that the latter is always greater than the former. In this intermediate position, the user will not be liquidated but they will not be able to borrow more of the base asset. The user can instead repay the borrow to bring the position to a safe state.

Whenever the liquidity projected with the liquidateCollateralFactor is negative, the liquidation process can start and it consists of two phases:

  • absorb phase: in this phase, all the collateral assets provided by the underwater account are seized and given to the protocol. This total amount is quantified in value using the liquidationFactor and the current prices of the assets. This implies a close factor of 100%. However, if there’s any excess after covering the debt, this excess is accounted for as base asset credit to the underwater account. On the contrary, if there’s a debt excess, the reserve will cover it in the first instance.
  • buyCollateral phase: if, after the absorb, the reserve is under target, the protocol will let anyone buying seized collateral do so at a discount price, incentivizing people to remove collateral from the protocol and inject more of the base asset instead, reducing the protocol’s exposure to potentially dangerous assets. If the reserve is above the target, the protocol will retain the collateral assets and will not allow the buyCollateral to be trigged. This situation is meant to cover the risk of maintaining such collaterals, given the amount in the reserve.

Notice that absorb and buyCollateral are two separate functions that are not always meant to be executed at the same time, since it depends on the target level for the reserve. Absorbers (users initiating an absorb) are accounted for the amount of gas that they spent to run absorbs, and those amounts are stored as liquidator points, which are then redeemable for rewards in a separate contract out of scope for the current audit.

Supply and borrow rewards

Apart from interest rates, users earn rewards for supplying and borrowing. These rewards are tracked and accrued on separate tracking indexes, which are then read by the CometRewards contract.

This contract has a reward token set for each Comet instance which will be distributed according to each user’s accrued rewards in the Comet contract. To receive their allocated reward tokens, users will call the claim function in the contract.

Configurator and Bulker

As mentioned before, different Comet instances can exist, either with different base assets or with different supported collaterals. For this, the team developed a system to easily manage such deployments and different configurations. This is what the Configurator contract is meant to do.

The Configurator contract will let the governance set all the parameters of a general config struct which holds all values needed for the Comet instance to be deployed with proper initial parameters. Whenever the configuration is ready, anyone can call the deploy function in the contract. This function will make use of CometFactory contract, which will deploy a new Comet instance with the configuration set so far in the Configurator.

The only parameter that can’t be changed in the Configurator is the base asset for the new Comet which comes in the Configurator initialization. For this reason, there will only be one Configurator contract for each base asset that Comet instances might use.

Finally, another useful tool is the Bulker contract. This is an auxiliary contract that can be used to supply, withdraw, and transfer assets in and from the protocol performing multiple actions in just one transaction.

Update: The team decided to change how the Configurator works allowing different configurations and factories to exist at the same time in the same contract. This will allow one Configurator contract per network supported, avoiding having multiple Configurator for different base assets and/or factories. The changes are introduced in PR#437 and PR#450.

Governance and roles

Special roles and permissions are the governance and the pauseGuardian. The governance:

  • Is the owner of the CometProxyAdmin, being able to upgrade Configurator and Comet to new implementation contracts.
  • Is the governor of the CometRewards contract, being able to configure reward tokens for each Comet or withdraw any token from the contract.
  • Is the governor of the Configurator, being able to set all config parameters before deploying a new Comet.
  • Is the governor of the Comet contract, being able to pause functionalities, withdraw reserves or approve a spender for Comet assets balances.

The pauseGuardian instead is only able to call the pause function of the Comet contract, as the governor, to pause functionalities.

Upgradeability

Both the Configurator and the Comet contracts are meant to be deployed using the transparent proxy pattern which gives the possibility to separate the logic and storage layer into two different contracts, the logic implementation (Comet and Configurator) and the proxy contract which holds the storage. In this proxy pattern, the proxy is an instance of the TransparentUpgradeableProxy contract. This proxy differentiates between admin actions and user actions by using a specific modifier and redirecting calls where needed. Both the Comet and Configurator have their own TransparentUpgradeableProxy. Specifically, the proxy admin can operate upgrades of the implementation logic layers, while users are redirected through delegate calls directly to the logic contract. The administration of the logic contract relies on the ProxyAdmin contract, implemented in the CometProxyAdmin contract. This contract abstracts away adminship actions over its managed proxies and is owned by the governance. It has a special function called deployAndUpgradeTo which will deploy a new Comet instance through the Configurator and upgrade the proxy to the new Comet implementation. In order to do so, the CometProxyAdmin must be able to default toward the Configurator.deploy function and for this, the TransparentUpgradeableProxy instance of the Configurator overrides the _beforeFallback function and allows such behavior. Thanks to the deployAndUpgradeTo function the governance can deploy and upgrade to a new Comet in just one transaction.

CometExt, Bulker, CometRewards and CometFactory are not upgradeable. At the end of this introduction, we show a diagram that summarizes the current architectural design.

Design

Finally, we wanted to highlight some aspects of the current system design that deserve their own discussions.

  • The protocol doesn’t take into account non-standard ERC20 tokens. This is explicitly assumed in the code base docstrings and it is intentional. Assets that might charge fees or that don’t return booleans or that in general don’t adhere to the EIP-20 standard might produce unexpected system behaviors. This implies that a proper analysis should be conducted on each supported collateral asset to determine the possible side effects of implementing them. We recommend adding this to the user documentation. Moreover, the Comet contract itself adheres to the EIP-20 interface but its internal logic is non-standard. An example is Comet‘s balanceOf function, which is the user’s principal only if it is positive, if the principal is negative, the balance is zero. The main reason why Comet is adhering to an ERC20 interface is because of future composability features.
  • There’s a novel liquidation design. Usually, closing only a percentage of the user position is enough to cover the underwater situation and might bring the user to healthy levels without the need of seizing everything in his position. This is known as the problem of over-liquidating a user, which, depending on the scenario, might be penalized too much. However, if there’s any excess credit, this is given in base asset units back to the user. In this way the protocol will automatically collect collateral assets from all users being absorbed, exposing itself to those assets’ risks. The protocol is intended to set the reserve target high enough to warrant the buyCollateral phase immediately after a absorb. If not set to a high value, it could cause major problems. But this alone doesn’t guarantee that the protocol will get rid of those assets. If the liquidation started because one of more collateral assets started to crash in price, the protocol heavily relies on buyCollateral action to occur as soon as possible. If the spread between the supplied base asset and bought collateral value is less than the fees, liquidations are unprofitable and if the collateral asset crashes too much in price, it might start to reduce attraction from liquidators. A comprehensive research study shows that cumulated sold collateral over two years in Compound v2 was worth over 350M USD. This might be an object of study for long-term reserve target values to avoid accumulating reserves too fast and have the target block collateral sell-off. If for any of the mentioned reasons, there are overdue liquidations, the protocol might become illiquid and not guarantee to all base asset suppliers the ability to withdraw.
  • The upgradeability mechanism presents some complex aspects:
    • On its own, the Comet contract will easily hit the 24kb size limit if more features or supported assets are added.
    • The Comet contract is upgradeable, but due to its size, it delegates calls to CometExt, which implements more functionalities. However, on its own, CometExt is not upgradeable and its address in the Comet instance can’t be changed after construction. This means that if CometExt needs to change, a new Comet must be constructed, forcing an upgrade mechanism to the Comet. This is likely to happen since CometExt holds the version variable that should change on each new Comet implementation.
    • Contracts have long inheritance chains that might make it difficult the task to avoid storage collisions on future added variables.
    • Some parts of the system are not upgradeable and have immutable parameters that might benefit from a change at some point in the future, like the governor in CometRewards.

The suggestion here is to carefully list all the actions and steps necessary to run safe and clear upgrades of the system, reduce codebase size where possible, and keep the system modular for easy opt-in/opt-out of future features.

General feedback

We are happy to see such a quality codebase. We didn’t find any critical vulnerability and are glad to have robustness across the contracts even with novel designs. The documentation is helpful and makes the task of understanding the codebase easier.

Findings

Here we present our findings.

High Severity

Locked assets in contracts

Once the protocol is deployed, the Comet and Bulker contracts will be two important pieces of the system. Comet is the main protocol contract while the Bulker is a useful tool to execute multiple protocol calls into one single transaction.

For different purposes, both the Comet and the Bulker support deposits of ETH into the contract. In the case of the Comet contract, the delegation toward the CometExt is in the fallback function, which is declared as payable, but there are no parts of both contracts that use ether. Moreover, there is no direct way to withdraw any ETH balance present in the contract.

In the case of the Bulker, the contract has a receive payable function to accept ETH which is needed to be used in the ACTION_WITHDRAW_ETH according to the docstrings. In this case, any ETH sent through the receive function will be again lost in the contract, with no possibility to upgrade to a new contract as the Comet can. The reason is that the ACTION_WITHDRAW_ETH is implemented into the withdrawEthTo function. This function unwraps WETH by sending tokens to the WETH contract and receiving back ETH in the same amount in the Bulker contract which are then sent to the user. In this case, the contract’s ETH balance will be untouched as only ETH coming from the unwrap will be used.

Lastly, a separate reference must also be done on ERC20 tokens. The Comet contract has the approveThis function which is enough to let a manager move any ERC20 funds that might get lost in the Comet balance. However, this is not the case for the Bulker contract, where ERC20 tokens might also get lost.

Consider establishing mechanisms to avoid such scenarios, as it results in a direct loss of user funds.

Update: Partially fixed in commit 3681613. In the words of the team: “We think it’s a good idea to add sweep functions to the Bulker to prevent funds from being locked in there. As for Comet, we purposely made the receive function payable in case we ever wanted to support a payable function in CometExt. Doing so allows us to add a payable function to CometExt without having to also upgrade Comet. Since Comet is upgradeable, I don’t think we need to support a way to sweep ETH out of the contract right off the bat”.

Medium Severity

governor can approve anyone to transfer the base and collateral assets within the Comet contract

The COMP token, the governance module (GovernorBravo) and the Timelock are the three components that make up Compound governance, allowing for the management and upgrade of the protocol.

The Timelock contract, which is also the administrator of the Compound v2 protocol, is meant to be in charge of all instances of the Comet protocol. Each proxy, the Configurator implementation, the Comet factory, the CometRewards and the Comet implementations are all under the governance control.

Within the Comet implementation, there is a variable called governor that will be set to be the Timelock address. The contract also has a function called approveThis that only the governor can execute and it approves anyone to transfer the base and collateral assets outside the Comet contract. Taking into account that the possibility of a governance attack exists (Beanstalk and Curve cases), user funds could be at risk.

If the function is meant to be used for specific purposes and can’t be removed, consider properly documenting this risk and establish verification measures on governance proposals to avoid misuse of this feature. To reduce the possibilities of a governance attack, be sure to always rely on a delay mechanism for proposals to be executed and eventually a pause guardian that can take action if a malicious proposal is spotted.

Update: Fixed. The team has improved the docstrings in PR#414. In the words of the team: “The main intention for approveThis is to allow governance to transfer out any ERC20s accidentally sent to Comet. We do recognize the ability for governance to give approval for the base and collateral assets and transfer out user funds. However, as OpenZeppelin has noted, this will likely require a governance attack. We’d like to point out that in the case of a governance attack, the attacker would not even need approveThis to steal user funds as they could upgrade the implementation of Comet to whatever they please.”

 

The protocol may end up holding collateral assets in an unwanted manner

The Comet contract has an immutable value that defines the target amount of reserves of the base token. This value is closely related to the buyCollateral function. This function cannot be called successful if the protocol reserves are greater than or equal to this target.

If targetReserves is set to a small value, the contract could easily reach the level. The problem is that the absorptions can continue but the protocol will not be able to sell the collateral because the buyCollateral function cannot be used and the protocol could be in a situation where it would hold assets that may lose value over time.

In the opposite case, where targetReserves is set to a large value, the chance of reaching this level would be much lower so it could be a useless constraint.

Keeping in mind that setting this variable to a small value is more of a problem, be sure to set it to a large value. Also if the value of the target is too high to not have a useful or practical use, consider re-design the system to not make use of it.

Update: Acknowledged. In the words of the team: “We intend for targetReserves to be a pretty large value so the protocol can use liquidations to build up a sizable reserve. Once reserves have reached targetReserves, we believe it may be advantageous for the protocol to start HODLing the collateral assets. We’ve run backtesting simulations to identify this as the best strategy for the protocol to build up reserves, but this strategy can definitely change as we conduct more research around liquidation auction strategies.”

Incorrect accounting of used gas

The asborbInternal function of the Comet contract contains important logic of the protocol where users that are liquidatable have their debts absorbed by the protocol. To do this task frequently and maintain health in the system, users will call this function whenever they detect a liquidatable user position.

As a reward for doing this task recurrently, absorbers (users calling the absorb function) are accounted for their gas expenditure into liquidation points, with the promise of redeeming those points for reward tokens in a separate contract.

The reward mechanism for the liquidation points is out of the scope for the current audit so we can’t assess the incentives alignments in performing this task with profitable rewards.

However, how the gas used is measured doesn’t reflect entirely the actual transaction cost for the user. In particular:

  • The priority fee is not taken into account. Absorbers will probably have to compete with each other and be as fast as possible in running absorbs. For this is likely to have a priority fee set as a miner’s tip in the transaction. Currently, the protocol only uses block.basefee but tx.gasprice = block.basefee + priority fee should be used instead.
  • Other operations are performed after the gas spent is measured, consuming more gas which is not taken into account.
  • Potentially, a user could deposit a minimum amount of each of the collateral assets supported by the protocol to increase the cost of the transaction, since it implies iteration over all supported assets recursively. Doing so, the rewards increase proportionally to the cost and it might be used maliciously by an underwater account since they might absorb their own position to earn rewards and potentially reduce damage from the liquidation.

Consider taking these suggestions into account and changing the way the gas used is measured to improve transparency and design correctness.

Update: Acknowledged. The team has improved docstrings in commit 14fbc27.

Low Severity

Everyone can deploy new Comet instances

Each Comet contract implementation that the protocol might decide to create is meant to be deployed in the Configurator contract.

This contract is an intermediate logic to bootstrap the entire protocol configuration and then apply it to a newly deployed Comet contract.

To do this, the Configurator makes use of a CometFactory contract which has a clone function whose sole role is to create a new Comet contract and return its address.

Whenever all protocol parameters are set, the deploy function in the Configurator contract is called. This function calls the clone function in the factory and emits an event to signal that a new Comet is ready with the configuration set so far.

The deploy and clone functions are both public callable functions, so anyone can, at any moment, generate the Comet instance either in the factory, passing arbitrary configurations, or either through the Configurator with the configuration set until that moment.

Is not clear why those functions are public as there is no benefit for users to call them. Moreover, leaving open the door for anyone to deploy instances of Comet with arbitrary configuration or emitting arbitrary events through the Configurator is a concern to take into account as it might be misused by malicious actors trying to create pishing-like attacks.

Consider restricting access to those functions and let them be called only by the governor or consider properly documenting such a design decision, raising awareness over the way it might be misused.

Update: Not fixed. The team acknowledge the issue and in their words: “We considered making Configurator.deploy() a governor-only function, however it would require adding a storage slot and complicating the Configurator which does not seem worth the tradeoff. It also doesn’t make sense to change CometFactory.clone() to be governor-only as the CometFactory is a stateless contract. We note for future reference that there isn’t a great way to get a list of official Comet instances from on-chain, however the canonical repository does have a list (roots.json) for each chain, which seems sufficient until a better solution is established.”

Gas inefficiencies

There are many places throughout the codebase where changes can be made to improve gas consumption. For example:

  • The for loops inside absorb and invoke functions do not cache the length of the array and perform unnecessary operations on each iteration.
  • The unchecked blocks for loop counters are not used consistently throughout the codebase. It is only used in the Invoke function, although it could be implemented in loops of the rest of the protocol contracts.
  • updateBasePrincipal in Comet should not check principal = 0 because in that case nothing will happen and gas will be wasted.
  • It is advisable that if a variable from the contract’s storage is going to be read within a function several times, a copy in memory should first be created since reading to the storage directly is expensive. However, if you are only querying for the value once, as in accrueInternal and Comet‘s fallback, it is recommended to read directly from storage without any intermediate steps.
  • In transferCollateral within the Comet contract, it is recommended to consult with getAssetInfoByAddress at the beginning of the function so that in case the token passed by the parameters is not within the collaterals of the protocol, the function fails early and without wasting gas unnecessarily.
  • Use unchecked { ++i; } over unchecked { i++; }.

When performing these changes, aim to reach an optimal tradeoff between gas optimization and readability. Having a codebase that is easy to understand reduces the chance of errors in the future and improves transparency for the community.

Update: Partially fixed in commit 90ca4d0.

Inconvenient use of immutable keyword

For accounts that use the protocol, the protocol provides a built-in system for tracking rewards. Comet contracts keep account of all accrued incentives for suppliers and borrowers of the base token, and users can claim them on CometRewards contract. It should be emphasized that all rewards from all the Comets from the same chain are claimed in the same CometRewards contract.

The latter has a governor variable defined which is the role that can set the reward settings and withdraw rewards from the contract. Since the contract does not have an upgradeability mechanism, it is inconvenient to define this variable as immutable. If the governor needs to be changed, a new contract must be deployed and the old contract’s state must be migrated to the new one.

Consider adding this variable to the contract storage and specifying a setter function so that the governor can be changed any time it is needed.

Update: Fixed in commits 43b5502 and 4d1c1a4.

Logic contracts initialization allowed

The Configurator contract has an initializable function that is meant to be called by the proxy. However, nothing prevents users from directly calling the initialize function on the contract implementation. If someone does so, the state of the implementation would be initialized to some meaningful value.

We suggest adding a constructor that sets the version to an incredibly high number so that any attempt to call the implementation at the initialize function would revert with an AlreadyInitialized error or even a specific one to signal that initializing the implementation is prohibited.

Leaving an implementation contract not initialized is generally an insecure pattern to follow. In this case, it might lead to a situation where an attacker can take control over the implementation contract by passing himself as governor and try to mislead users toward malicious contracts. This is not a security issue on its own but we strongly suggest avoiding such scenarios in all implementation contracts.

As a source of inspiration, here there’s an example of how the scenario can be avoided in general situations.

Update: Fixed in commit 79f59e5.

Missing validations

There are some places in the code base that might benefit from some sanity checks on the input provided:

  • The transferGovernor and setGovernor functions of the Configurator are not checking the address to be non-zero.
  • The CometRewards constructor is missing the same check over the address parameter.
  • In line 260 of the Comet contract, the priceFeed is set but is not checked to retrieve a valid price.
  • withdrawAndBorrowAmount and repayAndSupplyAmount functions assume certain values over the newPrincipal but those should be required instead.

To reduce possible errors and make the code more rodust, consider adding sanity checks where needed.

Update: Partially fixed in PR 455, merged commit bf20ccf. withdrawAndBorrowAmount and repayAndSupplyAmount have new validations but the rest of the items will not be fixed. In the words of the team: “There are arbitrarily many bad addresses which can be set, checking for the zero address seems like added complexity for little gain. In addition, while further checks in Comet.sol could be added, the contract is being optimized for efficiency and is up against a size limit, so we favor the current approach”.

Potential function clashes

The TransparentUpgradeableConfiguratorProxy overrides the _beforeCallback function.

Concretely, the _beforeCallback function is implemented in the TransparentUpgradeableProxy contract to avoid the admin of the contract to call the implementation logic directly.

This feature is removed in TransparentUpgradeableConfiguratorProxy contract, where the admin is allowed now to call directly the implementation by triggering the fallback function as a normal user would do. This is needed because of the deployAndUpgrade function of the CometProxyAdmin which sees the admin calling the Configurator.deploy function.

This is not a security issue on its own but it opens the door for potential clashes to happen. If one function is added either on the proxy or the logic contract, this can clash with any of the other contract functions. At this point, the admin will stop to be able to call the implementation contract (users will still be directed toward the implementation because of the ifAdmin modifier).

This article specifies how crafting clashes may not be too hard of a computational task. This article showcases how a new function in the proxy might actually enable clashes.

To avoid any unwanted behaviors, consider ensuring that the upgrade mechanism for Configurator always checks for potential clashes between the logic implementation and the proxy, especially if new functions are added.

Update: Fixed. The team added an off-chain check to avoid collisions in PR#430. Also, the team acknowledges the issue providing the following comments: “The two types of clashes that can happen are: – New function on proxy is introduced that clashes with an existing function in the Configurator. Admin is no longer able to call the function on the Configurator. To recover: The admin should still be able to upgrade the implementation of the proxy because that function lives on the proxy. Governance can simply introduce a new version of Configurator without the clash and upgrade the proxy to this new implementation. – New function on Configurator is introduced that clashes with an existing function on the proxy. Admin cannot call this new Configurator function.
To recover: Same recovery path as above. Function clashes only prevent the admin from calling a function on the Configurator, so the admin is still able to call the upgrade function on the proxy itself.

In either case, the contracts are in a recoverable state and nothing malicious can happen unless the admin is malicious.”

Underwater accounts can minimize losses

In the Comet contract, during an absorbeInternal call, the updateBasePrincipal function is called, updating the accrued interests on the liquidated user position.

If the seizing of collateral brought the new user’s balance to positive values the user will:

  • Have his excess collateral exchanged for the base asset (during an absorb this might be beneficial if the collateral price is crashing).
  • Have supply interest and tracking indexes accrued straight away after the absorb, over the excess collateral converted into the base asset. Concretely, the accrueInternal will update interest rates and the updateBasePrincipal will update the tracking indexes.

Moreover, an underwater can decide to even liquidate himself, earning additional liquidation points.

Consider the extra value that an underwater can extract from his position to determine if this can be leveraged to create some attacks. If those are intended behaviors, consider improving the docstrings around the absorption mechanism to reflect these details.

Update: Acknowledged. In the words of the team: “It sounds like the concern is that a user might absorb themselves for liquidator points and to sell off their collateral to the protocol quickly during a market downturn. In that case, it’s the purpose of the collateral factor to ensure a buffer in which the account becomes liquidatable and is still profitable to the protocol to liquidate. If a user chooses to absorb themselves it would economically imply governance has somehow created an absorption incentive greater than the liquidation penalty.”

Unnecessary complexity

The Comet contract delegates some feature implementations into the CometExt contract. This contract is meant to be an actual extension of Comet logic and implement some functions and parameters, including the version parameter.

At the same time, Comet is built through an upgradeable proxy pattern that requires a new Comet version to be deployed and the proxy pointed toward the new implementation.

During an upgrade, it is convenient to upgrade the version number to a greater value and to do so the protocol must deploy also a new CometExt implementation contract to indicate a new version.

This is because the version parameter is declared as constant and can’t be changed as a result of an upgrade mechanism without actually changing it in the contract’s code.

In the worst-case scenario, an error is performed in the upgrade mechanism, the version number is not incremented and potential systems integrated with the protocol might depend on that version number to establish some other logic.

To avoid deploying a new CometExt even if its implementation didn’t change, consider moving the version parameter into the Comet contract code.

Eventually consider keeping version in both contracts to differentiate between them, as both contracts might require some implementation changes.

Update: Acknowledged. In the words of the team: “The version in CometExt is meant specifically as part of the EIP712Domain of the contract. Only changes which affect this domain should be reflected in this version. Furthermore the logic relating to the domain is currently isolated to the extension contract, which is useful because it reduces the main contract size, and the size of the main factory.”

Notes & Additional Information

Anyone can set baseTrackingIndex

In the Comet contract, the accrueAccount function is publicly callable and it accrues interest rates and updates tracking indexes on the account specified as the input parameter.

Specifically, the tracking indexes are updated in the updateBasePrincipal function where if newPrincipal >= 0 then the baseTrackingIndex is set to a meaningful value.

So anyone is able to set this value for accounts that do not even exist on the protocol. Even if it is not a security issue on its own, consider restricting this function to users that have a principal strictly greater than zero.

Update: Not fixed. However, the team added a unit test in commit d4abcb2 to check that it doesn’t affect the protocol.

Inconsistent coding style

Inconsistencies in coding style were identified throughout the code base. Some examples are:

  • constants variables version and name and not in UPPER_CASE like other constant variables
  • The convention of functions named with the “_” prefix is not clear. Sometimes it is used for admin functions and other times for internal functions
  • Some structs use _reserved to fill slots, but others do not.
  • It is not clear what convention is used for the naming of codebase interfaces. Sometimes the letter I is used as a prefix, sometimes the word Interface at the end or in some cases the contract even misses both.

Taking into consideration how much value a consistent coding style adds to the project’s readability, enforcing a standard coding style with help of linter tools such as Solhint is recommended.

Update: Partially fixed. Only the second item has been fixed in commit c04c056.

CometMath is not used consistently

Many functions that could be in CometMath, a utility contract that contains pure mathematical functions, are scattered throughout the codebase and min, one of the functions within the contract, is not being used.

Consider consolidating all the helper math functions in one place and removing unused ones.

Update: Partially fixed in commit 16d213f. The min function has been removed.

Compilation warnings

While compiling the codebase contracts. The compiler raises some warnings. Specifically:

Consider resolving all compiler warnings.

Update: Fixed in commit 9e2b195.

Incorrect or missing docstrings

Across the codebase, some contracts lack proper documentation and docstrings. In particular, the IWETH9 and CometMath functions or the CometConfiguration and CometStorage variables are having little comments or nothing at all.

Consider thoroughly documenting all functions and parameters that are part of the contracts’ public API. Functions or parameters implementing sensitive functionality, even if not public, should be clearly documented as well. When writing docstrings, consider following the Ethereum Natural Specification Format (NatSpec).

Moreover, the Configurator contract explicitly states that BaseToken and TrackingIndexScale have no setters but it doesn’t specify where those are set, eventually in the config parameter passed as input in the Configurator initialization.

Consider writing this in the docstrings of the initialize function to improve clarity.

Update: Partially fixed in commit 9227075. Docstring was only changed in the Configurator contract.

Lack of indexed parameters

The CometDeployed, GovernorTransferred, SetFactory, SetGovernor, SetPauseGuardian, SetBaseTokenPriceFeed, SetExtensionsDelegate events lack of any indexed parameter.

Consider indexing event parameters to avoid hindering the task of off-chain services searching and filtering for specific events.

Update: Fixed in commit 7124b98.

Contracts folder is not properly organized

There is no convenient structure in the contracts folder to easily navigate between them. All contracts, regardless of their type or module they belong to, are mixed in a single folder.

To favor the developer experience and the maintenance of the codebase, consider adding additional folders following the structure within the vendor directory or separating protocol components into different internal folders.

Update: Acknowledged. In the words of the team: “The code actually is logically organized in that the protocol code sits at the top-level, with test and vendored contracts being secondary and sitting in subdirectories”. In the future, the team might reorganize into subdirectories but not at this time.

rewardsClaimed can be mixed between different tokens

In CometRewards it is possible to change the reward token of each Comet through _setRewardConfig. However, if the reward token is changed, the number of previous reward tokens claimed will persist and once someone claims their new reward asset, it will be added to rewardsClaimed despite being different assets.

Consider removing the ability to change the reward asset once set or changing the way the claimed rewards are stored if the reward asset changes.

Update: Fixed in commit ced8026.

Naming issues

To favor explicitness and readability, several parts of the contracts may benefit from better naming. Here are some examples:

  • The name CometProxyAdmin suggests that it is only the admin of the Comet proxy, but in reality, it will also have the same role on the Configurator proxy. Choose another name to avoid confusion.
  • TransparentUpgradeableConfiguratorProxy can be called ConfiguratorProxy. There is no need to use the inherited contract name as a prefix.
  • In CometMath, change InvalidUInt to InvalidUint and toUInt to toUint.
  • rescale and descale have different names but the same value, consider using one variable name scale.

Update: Partially fixed in commit b5a64d0.

Use of Global imports

Non-explicit imports are used throughout all protocol contracts, which reduces code readability and could lead to conflicts between names defined locally and the ones imported.

The inheritance chains within the protocol are long, and for this, the codebase would benefit from refactoring specifically which definitions are being imported in each contract.

On the principle that clearer code is better code, consider using named import syntax (import {A, B, C} from "X") to explicitly declare which contracts are being imported.

Update: Acknowledged. In the words of the team: “We do not consider this important or worth the effort of refactoring at this time”.

Potential front-run

The deployAndUpgrade function of the CometProxyAdmin is restricted in access to be called exclusively by the governance. It deploys a new Comet instance through the Configurator and upgrades the implementation address in the proxy.

However, it doesn’t call the initializeStorage function of the Comet contract through the proxy, leaving the new implementation not initialized. The function doesn’t take any input parameter and it is meant to be called only once without the need to call it again on new implementation upgrades.

Whether the first initialization is performed on a separate transaction or if in the future it will be possible to re-initialize the Comet instance with some input values, any user can front-run any governance attempt to initialize the new deployed Comet.

Consider taking into account that deployAndUpgrade and initializeStorage should be done in one unique transaction to avoid the front-run scenario, especially if input parameters or re-initializations are meant to happen in future developments.

Update: Acknowledged. The team added a scenario in PR#431 to test the governance flow for upgrading to a new version of Comet and calling its initialize function via one proposal.

Potential reentrancies

In the codebase, we found two places where reentrancy can occur. However, those do not pose any security issue or concern but awareness should be raised:

  • The invoke function of the Bulker contract can be re-entered.
  • The doTransferIn function of the Comet contract is often executed at the very beginning of executions, being it an anti-pattern to follow against reentrancy. Even if re-entering the same doTransferIn can’t be used as vector attack in this case, one can re-enter a different function, modifying the state in an unexpected manner. Making external calls is always suggested to be done after checks and effects.

To improve clarity, consider either reducing the attack surface by making those functions non-reentrant or document and raise awarness on such scenarios.

Update: Acknowledged. The team understands the concerns and replies: “Specific concerns due to reentrancies should be addressed with tests, static analysis or formal verification or code changes. Excessive documentation notes about universal theoretical concerns don’t likely add much except make the documentation harder to read and maintain”.

Repetitive code

In many parts of the codebase, repeated or similar lines of code can be seen. Here are some examples:

Consider reusing the same code defined in just one place or, if appropriate, removing duplicate code.

Update: Acknowledged. In the words of the team: “We gave considerable thought to how redundant sections of the code were organized and tried various permutations. Although seemingly redundant, the current form is overall the best we found in terms of the properties we were evaluating (namely clarity, code size, gas cost)”.

Typos

Line 96 of the CometExt contract has a typo “whi” and the number of decimals showed here is wrong, as it should be one zero less.

To improve correctness and readability, consider reviewing both the contracts and the documentation for typos.

Update: Fixed in commit a1bd99f.

Unnecessary return values

In the Comet contract, there are functions like the supply or withdraw that return calls to internal functions even if there’s no actual final value returned at the end.

Consider reviewing all the occurrences where this happens and avoid returning when not necessary. This will improve readability and correctness.

Update: Acknowledged. In the words of the team: “These are used to handoff control flow and can actually improve readability with that understanding”.

Lack of explicitness on data type sizes

The protocol heavily relies on different sized variables, which can have also positive or negative values and different scaling factors. Thanks to this, the deployment and execution of the codebase will decrease gas costs.

Given the fact that it adds some complexity and undermines the readability of the codebase, it is of utter importance to maintain explicitness and consistency across different contracts.

Specifically, implicit castings and sizes should be avoided.

To improve the overall quality of the codebase, consider reviewing it in its entirety, changing all occurrences of uint to uint256 and of int to int256. Consider also reviewing implicit castings from small to bigger sizes and always use the appropriate size for each variable.

Update: Partially fixed in PR#421. The team will continue to use the aliases uint and int as they consider them more readable. In their words: “We removed all occurrences of implicit upscaling. We accept that uint256 and uint are interchangeable in Solidity and that authors are aware of this”. Also, in PR#454, the team fixed an unsafe cast and improved gas usage.

PRICE_SCALE constant is not used

A constant called PRICE_SCALE is defined in the CometCore contract and is supposed to be used to scale the prices returned by Chainlink aggregators.

Although the function priceScale returns the value stored in the bytecode, the constant is not used anywhere else.

Consider removing this constant or alternatively integrating it into the codebase.

Update: Ackwnoledged. The team response: “PRICE_SCALE is not used internally, but it is exposed via the priceScale function, which could be used to understand the results of the getPrice function”.

Wrong value emitted in event

Lines 1219-1221 of the asborbInternal function in the Comet contract are:

uint104 debtAbsorbed = unsigned104(newBalance - oldBalance);
uint valueOfDebtAbsorbed = mulPrice(debtAbsorbed, basePrice, uint64(baseScale));
emit AbsorbDebt(absorber, account, debtAbsorbed, valueOfDebtAbsorbed);

Where, during an absorb oldBalance is negative (otherwise the isLiquidatable modifier at the beginning of the absorb function would have exited earlier) and newBalance >=0. But if newBalance > 0 the debtAbsorbed should be unsigned104(-oldBalance - newBalance) instead since the positive excess is not actual debt that has been absorbed.

Consider emitting the correct value in the AsborbDebt event or renaming the debtAbsorbed variable to reflect that it does not account only for the debt absorbed but also the excess collateral exchanged for the base asset.

Update: Fixed in commit edc5a0a.

Conclusions

No critical severity issues have been found, along with one high severity issue and many others lower in severity. We strongly recommend addressing even the lowest in severity since they would drastically improve the overall quality, clarity, and security of the protocol.

Update: The team has addressed all issues either fixing them or providing improved docstrings and proper explanation arguments. Some of the changes introduced in the codebase are still open as pull requests and not incorporated into the main codebase. We assume those changes that we reviewed to be merged as they are without introducing any new change that might create new issues.

Appendix

Monitoring Recommendation

The active monitoring of smart contracts is an important practice that can represent additional protection for a project, allowing an immediate response to unforeseen incidents. We recommend implementing monitoring for all sensitive actions and the state of critical variables. For instance:

  • Monitor if Comet contract reaches the targetReserves. At that point, the collateral tokens seized with the liquidation will be retained by the protocol, and this could represent a risk if it relates to market prices precipitating in prices.
  • Monitor callable governance functions, especially approveThis, and upgrades to malicious implementations in governance attack scenarios.
  • Direct transfers of base asset to Comet contract (either to report an erroneous transaction or attempted manipulation).
  • Large capital liquidations. Either the absorb function is executed for a large position or the position exceeds the borrowCollateralFactor and is at risk. This should inform a possible strong market price drop or the liquidation of a large entity.

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