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Empty Set V2 Audit


After auditing the first version of the protocol, the Empty Set Squad team asked us to audit their second version of the protocol, namely emptyset (formerly named dollar-continuous).

The repository can be found here and we audited the master branch on commit bf9753ef9cd5b17236036257f290e0d0b850a029.

The scope of the audit has been limited to the contracts present in the protocol/contracts/src folder. These were:


The following contracts were left out from the scope:


All other project’s files and directories (including tests), along with external dependencies and projects, game theory, and incentive design, were also excluded from the scope of this audit.

Project overview

The new version of the protocol introduces several differences from the previous one. The new protocol creates a stablecoin called ESD which relies on different mechanisms to stabilize the ESD price around 1 USDC. The new protocol consists in 3 new tokens: ESD, which is represented by the Dollar contract, ESDS, which is represented by the Stake contract, and sESD, implemented by the StabilizerToken, all of 3 described below.

The project consists of the following parts:


The GovernorAlpha contract implements the main governance logic. It is forked from the Compound’s governance system and it makes use of a Timelock contract and a governance token represented by the Stake contract. The Timelock contract is used to queue successfully voted proposals and to allow users to eventually exit the protocol if they do not agree with the queued proposals. Similarly, the Stake contract provides the ESDS governance tokens to let users have vote powers, and choose a delegatee to vote on proposals.

The GovernorAlpha contract has a special role called the guardian which is set in the constructor and has special permissions to execute the following actions:

  • Cancel any non-executed proposal via the cancel function.
  • Bypass the governance mechanism to change the Timelock‘s admin at will (calling the GovernorAlpha contract __queueSetTimelockPendingAdmin and __executeSetTimelockPendingAdmin functions), meaning that the Governor’s guardian can override any queued proposal that attempts to change the Timelock contract’s admin (i.e., a proposal that calls the setPendingAdmin function), as the guardian can call __queueSetTimelockPendingAdmin with any eta.
  • Make the GovernorAlpha contract accept administrative powers over the Timelock contract, calling the __acceptAdmin function.
  • Abdicate, by calling the __abdicate function.


It is used as a unique source of information, almost all contracts query protocol contract addresses to the Registry contract.

This contract is owned by the Timelock contract, which is the one responsible, through governance actions, to execute proposal that will set contract addresses in the Registry contract.


The Incentivizer contract is a general mechanism forked from the Synthetix project which aims to let users stake an underlyingToken and receive rewards from it in the form of a rewardToken, that can be either different or equal to the first asset.

Rewards are distributed according to a rewardRate and in a continuous-in-time behavior, dispersed in the contract for each second that has passed up to a certain timestamp given by the rewardComplete parameter.
Both parameters can be updated to new values before the reward program ends by calling the updateRewardProgram.

Users can stake underlying tokens, withdraw parts of them, claim all accrued rewards, or call the exit function that will withdraw and claim all the assets at the same time.

Eventually, there is also the rescue method that will send stucked ERC20 tokens, or a surplus of reward tokens, to the Reserve contract described below.


The Migrator contract is in charge of handling the conversion of ESD tokens from v1 to ESDS governance tokens in a fixed ratio,
while bonded ESD in the previous version will be converted to ESDS into a 1-to-1 ratio.

Users from v1 will have to redeem their coupons before migrating to the new version since the Migrator contract will not take them into account. All v1 assets which are migrated are also burned and the contract must be funded with enough ESDS beforehand to supply the demand. Several of actions must be performed before migrating the assets, including execution of governance proposals in the governance system of the v1, which were left out of scope.


The Vester contract is a general purpose contract inspired by a deprecated OpenZeppelin contract's draft that is able to release to a beneficiary an amount of tokens over the course of the time. It is intended to be used with governance ESDS tokens and the releasing schedule is linear on time.
The beneficiary can transfer its status to another address or withdraw the vested tokens at any time. Finally, the beneficiary can also delegate the voting powers associated with the vested and unvested tokens to a delegatee making the tokens usable while being under the vesting period.


The Reserve contract is a core module of the current system and it is made of several sub-contracts that it composes together.

  • It manages market orders of arbitrary tokens pairs that the governance can list to let users trade against them.
  • It can mint and burn both ESD and ESDS tokens. This contract will be the owner of those tokens contract and it is owned by the governance.
  • It handles the state of a borrower party, namely the Stabilizer described below, that will borrow ESD unbacked tokens, generating debt inside the Reserve.
  • It handles debt modifications associated to the minting and burning of ESD together with the deposits and withdraws of USDC.
  • It will deposit owned USDC on a Compound’s vault obtaining cUSDC tokens in exchange. It will also redeem and supply more USDC to the vault on-demand, whenever needed. It will also claim COMP rewards accrued for depositing USDC in the vault.
  • It is upgradeable, together with the Stabilizer.

Users can interact with the Reserve through the following methods:

  • mint: will mint 1 ESD for each USDC provided in the function call.
  • settle: will burn ESD and transfer back to the user the same amount in USDC. This method can only be called if the same amount of burned ESD can be deducted from the borrower debt without underflowing.
  • redeem: will instantly burn an amount of ESD tokens and give back to the user an amount of USDC that depends on a redeemPrice which finally depends on the reserveRatio between ESD and USDC reserves and on a fixed and artificial redemptionTax.


The Stabilizer is another core module for the entire protocol. As the Reserve does, it is created by composition of several subcontracts. It is in charge of taking out from circulation ESD while holders of sESD will increase over time their value in ESD.

  • It uses the result of the Oracle, described below, with an exponential moving average EMA function to look up at the price of the ESD/USDC market pair from a UniswapV2 Pool.
  • It let users supply ESD tokens to the contract and receive “Saved Empty Set Dollar” sESD tokens, an ERC20 token reimplementing internal accounting of balances and supply, but still adhering to the ERC20 standard.
  • It will borrow unbacked ESD tokens from the reserve in an amount calculated by the use of the market price given by the Oracle periodically over time.
  • It let users redeem accrued rewards in the form of ESD tokens by providing their sESD. The redeemAmount amount will definitively depend on the ratio of the balances of USDC and ESD of the contract.

Users can interact with the Stabilizer through the following methods:

  • supply: will transfer into the contract an amount of ESD tokens and will mint back to the user an amount of sESD dependent on the ratio between sESD and ESD supplies.
  • redeem: will burn an amount of sESD tokens and will transfer back to the user an amount of ESD dependent on the ration between ESD and sESD supplies.
  • redeemUnderlying: will act the same as the one above but the user will specify the amount directly in ESD and the contract will calculate how much sESD will have to be burned from the user.


The Oracle contract is an implementation of a UniswapV2 TWAP oracle. It will be owned by the Stabilizer and, once setup, will retrieve the average time-weighted price from the UniswapV2 ESD/USDC pool.


While we were auditing the code, the Empty Set Squad team detected and fixed an issue. The Reserve contract was using the ReentrancyGuard contract provided by OpenZeppelin, but being this a contract not compatible with the upgradeable pattern chosen by the developer team, the code has been refactored in PR#1.

Update: After the audit ended, the Empty Set Squad team found and fixed an issue on pull request 3. In the ReserveComptroller contract, if an user tries to mint a small number of ESD tokens then the rounding operation could allow the user to mint ESD without paying any collateral. However, this operation is capped by 10^12 - 1 wei of ESD, which represents a very small amount.

Update: After the audit ended, the Empty Set Squad team decided to remove the whole Stabilizer module from the protocol. The module was meant to take ESD out of circulation by depositing it into the contract and accrue more ESD over time. However, under certain edge conditions and parameters, factors that cannot be battle-tested in an early stage of the protocol, the mechanism could increase even further the ratio of supply to collateral. More reasons behind the removal of the module, along with other changes of the codebase, can be found in pull request 19. Due to this, some findings that point to code that has changed may not be valid or accurate. In particular, issues M01, M10, M11, L02, L04, L14, N02, N07, and N08 have been affected. It is worth mentioning that the redemptionTax variable has been removed from the contracts and it is not used anymore in the calculation of the redeemPrice value, and that with the removal of the Stabilizer module, the ReserveComptroller contract reduced its functionalities to only mint new ESD and to redeem them for a redeemPrice <= 1. The Stabilizer module was an example of a possible mechanism that could be added into the protocol to achieve the desired peg and stability, and it could be added in a near future once the protocol has been tested in real-time scenarios.

This audit was not meant to put attention into the game theory design and its incentives to stabilize the final price of ESD. We assume proper due diligence in initializing the contracts and setting the right permissions and supplies to the corresponding parts of the protocol.

Overall, we found the code to be clear to follow and read, with most functions and contracts properly documented. However, the lack of an extended supportive documentation made difficult the understanding of some parts of the protocol. We highly recommend the team to improve the supporting documentation to describe every single contract and function. Moreover, there was a lack of comprehensive tests that could tackle edge scenarios and a coverage report. Furthermore, we strongly suggest to run economic simulations that could validate the hypothesis behind the code base, and test a mock-up version of the protocol in a controlled environment such as a public test network.

The code has been audited during the course of 3.5 weeks by two auditors and here we present our findings.

Critical severity


High severity

[H01] Rescue of ERC20 tokens can fail

The Incentivizer contract has the rescue function that can be called to send to the reserve any ERC20 token that is left in the contract.

The fact that an arbitrary token address is passed proves that it is intended to move all types of ERC20 tokens.

However, the call in the rescue function of the verifyRewardBalance function will revert anytime there are no sufficient reward assets in the contract, as required in lines 193-194.

The docstrings of the function states that this function can transfer any ERC20 token, but this is not always true if not enough rewards of rewardTokens are in the balance of the contract, even though the tokens to be rescued do not count for that balance.

Consider either restricting the rescue function to only exclusively rescue rewardsTokens or to exclusively call the verifyRewardBalance if the tokens to be rescued are reward tokens.

Update: Fixed on pull request 14. The EmptySetSquad team stated the following for this issue:

verifyRewardBalance() couldn’t ever fail unless either token is rewardToken or the contract has been hacked and drained, this is purely an extra defensive check rather than something that could ever be hit under normal usage.

[H02] Test are not following contracts logic

The code base presents tests in the protocol/test directory.

Almost all modules (except for the Governance contracts along with all libraries) have unit tests under their respective folders and the execution shows that all test pass.

However, some of the tests are not following the logic of the contracts implementation and are not testing appropriate conditions that should revert contract calls.

One example is the ReserveSwapper test file.
According to the contract implementation, the swap function of the ReserveSwapper contract should revert whenever the ESD token address is used either as a takerToken or makerToken.

However, in the corresponding test of this function , the ESD address is passed as parameter and the function doesn’t revert in this case.

The test passes only because the ESD address hasn’t been set in the Registry contract at test execution time, so the line 75 is comparing the passed input address with the zero address.

In this specific case, the test that actually sets the ESD address in the Registry contract is the ReserveComptroller test suite.

This is considered a major shortcoming in the project, as there is no way to determine if the current implementation matches the system’s expected behavior.

Consider being careful when coding tests to validate the expected behavior even on edge cases.

Update: Fixed on pull request 16.

Medium severity

[M01] Governance can be tricked into performing external calls to a malicious contract

The Incentivizer contract allows the protocol to give rewards to users that stake underlying assets.

In case of having unused assets by the Incentivizer contract, the governance can call the rescue function transferring those into the reserve.

However, this opens a backdoor which a malicious user could exploit. An user could create a malicious contract that simulates to be a ERC20 compliant token that deposits tokens in the Incentivizer contract, and when the governance passes a proposal to rescue those tokens and send them into the reserve, an external call to the malicious contract will be executed without checks on the other end.

Furthermore, once received into the reserve, the governance could create an order to swap them and when the attacker makes the call to the swap function from the ReserveSwapper contract, the malicious external call would now be originated from the reserve.

Although the contract is shielded by the OpenZeppelin’s ReentrancyGuard contract and no funds cannot be moved with this attack, reducing the attack surface on the code, and specially on contracts that handle the assets such as the ReserveSwapper and the Incentivizer contracts, is always recommendable to prevent that future versions of the protocol could be affected by this attack.

Moreover, as discussed in the introduction, the ReentrancyGuard shield has been removed from the code while the audit was being performed.

Consider restricting the possibility to perform external calls to untrusted contracts to reduce the attack surfaces in the protocol.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Updated docs with a guide on acceptable ERC20 properties for governance.

[M02] Documentation issues

Overall, the code base presents well documented functions and clear docstrings. However, there are some designs choices and parts of the code which lack of a proper description.

The ReserveSwapper contract allows the governance to list orders on ERC20 token swaps. Any user can trade against those orders once listed. Tokens to be swapped must be owned by the reserve itself but
how this contract is going to be used and which ERC20 are going to be traded is not documented anywhere. Moreover, in line 51 from ReserveSwapper.sol it is clear that the reserve can have an unlimited amount of tokens to be sold but it’s not clear nor documented this design choice and in which cases the governance can list an unlimited amount order for a specific token.
Consider adding proper documentation about the intentions over the use of this feature.

The Stake contract defines all the properties of the ESDS governance token. Balances and allowances for this token are accounted as uint96 variables in order to pack the CheckPoint struct into 128 bits.
Because of this, every place in the code base that makes use of the ESDS tokens must carefully manage big balances or allowances in order to avoid overflows. As an example, the ReserveIssuer contract is defining the mintStake and burnStake functions that mint and burn ESDS tokens, but those functions are not properly documented to reflect the internal behavior of the ESDS token.
Consider carefully document any use of ESDS tokens outside of the Stake contract to prevent developers and users from performing miscalculations.

The redeem function from the ReserveComptroller contract retrieves USDC tokens in exchange of ESD tokens, which these are then burned.
Because of the redemptionTax that can be set to artificially manipulate the price, the actual redeemed amount, can be artificially lowered to any value, including zero.
Consider explicitly warn users about this possibility and properly document this behavior.

In line 104-107 from ReserveComptroller.sol, the docstrings are not clear about the fact that the user must first approve the contract to transfer tokens.
Consider adding this to the docstrings of the function.

Update: Fixed on pull request 15.

[M03] Missing test coverage report

There is no automated test coverage report. Without this report it is impossible to know whether there are parts of the code never executed by the automated tests; so for every change, a full manual test suite has to be executed to make sure that nothing is broken or misbehaving.

Consider adding the test coverage report and making it reach at least 95% of the source code.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Won’t currently fix – Solidity coverage tool currently incompatible with our setup.

[M04] Orders registration can be frontrun

The governance can call the ReserveSwapper contract to register a market order for a token pair. Once the order is registered, users can start calling the swap function and exchange one token for the other.

If the governance tries to update an already existing order, an order with a limited amount of tokens, that call can be frontrun by a malicious actor, which can call the swap function for the same token pair, zeroing the order amount in the accounting balance.

If this happens, after the new governance order has been mined, any further call to the swap function can unexpectedly fail in transferring the tokens, since the actual balances of the contract are not taken into account when registering the order’s amount.

Consider checking if the contract has enough balance of the respective tokens before setting any non-limited order amount.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Won’t fix – generally speaking, this module is meant to be holdover until we can create a more robust DAO treasury management system as part of a larger effort. Included note in governance on how to properly account for these limitations.

[M05] Same transaction on different proposal could revert

The GovernorAlpha contract implements the functionality to propose, vote, and execute proposals, among other actions.

Each proposal can have multiple transactions to process when it is being executed. When a proposal succeeds, these transactions are queued in the Timelock contract by passing all the transaction’s information and the time in which the transaction will be able allowed for execution.

However, because different proposals could have one same transaction with the same parameters among many different transactions, if two proposals are queued under the same block, then the first time in which the transaction could be executed will be the same, meaning that the hash used to identify that transaction will be taken. Therefore, during the queue process of the second proposal, the requirement that checks if it was already queued will revert.

Consider adding a proposal nonce as part of the hashed data to identify identical transactions as different ones on different proposals.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Won’t fix – safe to assume two proposals will never need to be committed in the same block, and we don’t want to modify widely-used forked code unnecessarily.

[M06] Underlying tokens could get stuck

The Incentivizer contract allows users to receive reward tokens when staking underlying assets into the contract.

However, because the contract requests underlying assets to be transferred into the contract in order to proceed, and due to human nature, users may transfer directly those underlying tokens with a simple ERC20 transfer transaction instead of calling the stake function.

Although the contract has a function that can be used to move any token into the reserve, the rescue function, this function works with any token except the underlying asset. Therefore, any underlying asset sent through a regular transfer transaction will get stuck in the contract without any possibility of taking it back.

Because underlying assets may be sent directly into the contract on a daily basis , consider implementing the possibility to withdraw those stuck assets from the contract.

Update: Fixed on pull request 14.

[M07] Deprecated TokenVesting draft contract is used

The Vester contract is using the TokenVesting contract provided in a previous deprecated draft version provided by OpenZeppelin.

Using deprecated contracts which are in draft status and not properly audited can be dangerous and increase the attack surface.

Consider properly documenting this and correctly inform users of its use.

Update: Acknowledged.

[M08] Unnecessary ABIEncoderV2

The ProxyRoot and Registry contracts are using the experimental ABIEncoderV2 pragma directive but there is no explicit use of it in the contract.

Furthermore, the usage of the experimental ABIEncoderV2 is discouraged in older Solidity versions since there have been important fixes for this encoder since then. The risk can be mitigated by being extra thorough on the testing process of the project at all levels. However, even with great tests there is always a chance to miss important issues that will affect the project.

Consider removing the directive from the contract files, and consider also more conservative options, or upgrading the Solidity version used to a newer version where the ABIEncoderV2 is stable, or rewriting the project to use the current stable encoder.

Update: Fixed on pull request 13. The ProxyRoot contract has been removed along with the usage of the ABIEncoderV2 pragma in the Registry contract.

[M09] Untested custom SafeMath library in use

Several contracts implement arithmetical operation functions based on OpenZeppelin’s SafeMath library, customized to support safe mathematical operations for uint256, such as the GovernorAlpha contract, uint96, such as the Stake contract. Yet, none of the functions are tested, which may hinder users and developers’ trust in this custom library. Moreover, any change in the library is not going to be detected by the current test suite, rendering all business logic depending on it vulnerable to potential security issues introduced by these future modifications.

Consider including thorough and extensive unit tests for those functions.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Won’t fix – widely-used forked code already tested externally.

[M10] Updating storage variables could soft-brick the protocol

The Implementation contract has the setRegistry function which is used to update the address of the Registry contract in all contracts that inherit from the Implementation contract, such as the ReserveAccessors contract contract or the StabilizerAccessors contract.

In Line 78 of the same function, the require statements force either:

  • To have not set the registry address yet.
  • That the new Registry which is going to be set, has the same timelock address of the old Registry contract.

The Registry contract is owned by the Timelock contract, that executes transaction to set addresses on the Registry contract on behalf of the governance.

All the setter functions from the Registry contract are lacking from input validation, so it is possible, by mistakenly executing a bad proposal, to set the Timelock contract’s address in the Registry contract to an erroneous address (either an EOA or another contract).

If this happens, the setRegistry function of the Implementation contract will revert at any call trying to update the Registry contract’s address, freezing entirely the functionality.

Consider validating that the timelock address is a valid contract address whenever it is set in the Registry contract. This can be done using the OpenZeppelin Address.isContract function or eventually, consider also implementing the EIP1820 for this use case.

Update: Fixed on pull request 12.

[M11] Possible compromised storage due to hierarchy composition

The design chosen for the upgradeability of certain contracts, such as the Reserve and the Stabilizer contracts, consists of composing those contracts by means of smaller ones and use an upgradeable proxy pattern with the resulting contract.

For this reason, the storage variables of both modules are stored respectively in the ReserveState and the StabilizerState contracts.

The intention is to have a unique contract for all the state variables of each module and have less overhead when upgrading through proxy patterns. This can be a good design decision whenever the composition of the contracts is strictly followed in order.

However, there are several cases where some contracts extend and import the same contracts multiple times and in different orders. Some examples are:

  • The StabilizerImpl contract extends the Implementation contract, however it is already been inherited by the StabilizerAdmin contract through the StabilizerComptroller contract.
  • The StabilizerState.sol file has duplicated imports. Moreover the Implementation contract already imports the IImplementation interface.
  • The ReserveImpl contract imports are already imported in ReserveIssuer and ReserveSwapper contracts. Moreover, the Implementation import is not used.
  • All imports of the ReserveSwapper, except for the ReserveComptroller import, are already imported in the ReserveComptroller.
  • The Dollar contract imports the ERC20Detailed contract but this is already imported by the Permittable contract.

Changing the order of the composition can result in different contracts layouts if imports are mixed in different orders. However this is unlikely to happens since the storage is centralized in one unique contract.

Consider reviewing all orders imports and duplications to ensure a clear composition order and reduce the possibility of compromising storage when upgrading the Reserve or the Stabilizer implementations.

Update: Fixed on pull request 11.

[M12] Wrong arithmetic operation when normalizing prices

The Oracle contract implements the logic to retrieve the updated price of a listed asset.

When a price is updated, the _normalize function is called to adjust the difference between the decimals of the pair of assets involved. The value of 6 for USDC is compared against the one for the queried token and the price value is multiplied by the difference between each other.

However, when the other token has less than 6 decimals, the price is also multiplied by the difference of decimals instead of dividing by it.

Although currently the other token used will be ESD with 18 decimals, which means that it will not encounter this issue, consider dividing instead of multiplying the difference of decimals when the token has less than 6 decimals.

Update: Fixed on pull request 10.

Low severity

[L01] Lack of guardian-role transfer

The guardian address from the GovernorAlpha contract has a special role inside the system, which is allowed to either cancel a proposal or proceed with the admin-change process, among others.

However, if the address associated with the guardian gets compromised, there is no way to transfer those special roles to another address.

Consider creating a function to transfer the guardian role to another address or consider documenting this limitation.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Won’t fix – don’t want to modify widely-used forked code unnecessarily.

[L02] ESD price defaults to one

In the StabilizerComptroller contract, whenever the oracle becomes unhealthy, the protocol sets immediately the ema to 1.

Whether this choice is intended to protect or stabilize the price of the ESD to a fixed price, it is not clear and straightforward why that would be the best mitigation to an unhealthy oracle.

Consider properly justifying this choice or the assumptions that are taken in place whenever the oracle becomes unhealthy.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Expected behavior since a stablecoin’s neutral price is $1.00.

[L03] ERC20 compliant assets may not be used

In the Oracle contract, the _normalize function is used to normalize the difference in decimals between USDC and a certain token. Although it is meant to be used against ESD, the Oracle contract generality allows other assets to be queried there.

Nevertheless, because the ERC20 decimals getter is optional, using any asset without the getter in the protocol will fail at retrieving the number of decimals used for their internal accounting, and with it the transaction will revert.

Consider implementing the functionality to allow the usage of ERC20 compliant assets that do not have a decimals getter or taking this into account when whitelisting assets.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Updated docs with a guide on acceptable ERC20 properties for governance.

[L04] Implementation functions sparsed into different contracts

The Implementation contract declares and implements the logic to get the respective logic’s implementation and the admin’s address.

However, there are some function declarations that lack its definition, such as setting the registry’s address or the owner of the contract.

These two functions are declared in the StabilizerState and in the ReserveState contracts, and both have the same functionality.

Whether this is meant to be consistent to keep all state variables in the respective contracts or not, having the implementation of a function in different contracts without a proper reason produces a more complex code and lower its readability.

To improve the code’s readability and factorization, consider defining both functions in the Implementation contract.

Update: Fixed in pull request 20. The IImplementation interface has been removed, while the Implementation contract has been refactored to host definition and implementation of the getters and setters of the owner, registry and notEntered parameters. The Implementation contract does that by an unstructured pattern of choosing specific slots to store and set the variables. Since the ReserveAdmin and the StabilizerAdmin contracts are already extending from the Implementation, the StabilizerAccessors and ReserveAccessors contracts (that extends from those) have been refactored too.

[L05] Hardcoded parameters in Governance

In the GovernorAlpha contract, the quorumVotes, proposalThreshold, proposalMaxOperations, votingDelay, and votingPeriod functions are returning hardcoded values for the corresponding parameters.

Having hardcoded parameters forces developers to deploy a new contract if one of those parameters needs to be changed.

An example would be the votingPeriod, initially set to 17280 blocks (3 days, assuming 15 seconds for each block). The assumption will be false whenever the community integrates EIPs that can change seconds per block directly.

For this reason, consider adding proper setter functions to those parameters. These functions could be called by the guardian of the GovernorAlpha contract or by the Timelock contract through a proposal.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Won’t fix – don’t want to modify widely-used forked code unnecessarily.

[L06] High value ERC20 operations may revert

The ESDS token is the token used to vote proposals in the governance and it stores its total supply under an uint256 variable. However, the accounts balances are stored in uint96 variables.

Furthermore, the Vester contract is in charge of gradually distributing ERC20 tokens, such as the ESDS token, during the lifespan of the contract. Although the contract has been implemented using uint256 variables, the same outcome as mentioned would happen when balances come close to the maximum number of an uint96.

If external projects adopt the protocol, the expected behavior of a complaint ERC20 may result in unexpected transaction reverts.

Consider either using uint256 variables for the balances or documenting the reason to use uint96 variables.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Won’t fix – don’t want to modify widely-used forked code unnecessarily.

[L07] Implicit casting

The lack of explicit casting between different variable types, hinders code’s readability, making it more error-prone and hard to maintain.

In GovernerAlpha.sol, in lines 301, 303, and 310 implicit castings from uint96 to uint256 for the votes input are performed.

In the same way, in Stake.sol, in line 108 and 126 implicit castings of amount from uint96 to uint256 are performed. Finally in line 179 of the same contract, the returned value should be a uint256 but it’s used an uint96.

Consider explicitly casting all integer values to their expected type when sending them as parameters of functions and events. It is advisable to review the entire codebase and apply this recommendation to all segments of code where the issue is found.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Won’t fix – don’t want to modify widely-used forked code unnecessarily.

[L08] Lack of event emission after sensitive actions

The __acceptAdmin and the __abdicate functions of the GovernorAlpha contract do not emit relevant events after executing their sensitive actions.

Consider emitting events after sensitive changes take place, to facilitate tracking and notify off-chain clients following the contracts’ activity.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Won’t fix – don’t want to modify widely-used forked code unnecessarily.

[L09] Lack of input validation

There are several places in the code base where input parameters are passed in function calls without any kind of validation of their values. Examples are:

  • The amount variable of the stake and withdraw functions from the Incentivizer contract is not validated to be non zero.
  • The propose function from the GovernorAlpha contract is not checking whether the description is empty or not.
  • The approve function from the Stake contract is not validating the spender input parameter.

Even though this issue does not pose a security risk, the lack of validation on user-controlled parameters may result in erroneous transactions or useless use of gas.

Consider adding proper checks on the values passed in function calls.

Update: Partially fixed on pull request 9. The GovernorAlpha and Stake contracts have not been changed. The EmptySetSquad team statement for this issue:

Leaves GovernorAlpha and Stake as-is to not modify forked code unnecessarily.

[L10] Missing tests

No tests were found for the governance system implemented in the contracts. This is considered a major shortcoming in the project, as there is no way to determine if the current implementation matches the system’s expected behavior.

Consider adding tests for diverse cases and edge scenarios.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Won’t fix – widely-used forked code already tested externally.

[L11] View function creates a pointer to storage

The GovernorAlpha contract implements the functionality to propose, vote, and execute proposals.

To know what a proposal will execute, an user can call the getActions function which will retrieve all the information of the transactions.

Although this function is public view and it is not meant to change the data in storage, the pointer created points to storage instead of memory.

Whether this is a design choise or not, consider changing it to memory to reduce the attack surface in the contract.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Won’t fix – don’t want to modify widely-used forked code unnecessarily.

[L12] Order of arithmetic operations reduces the outcome’s precision

In the Oracle contract the price update is done by first dividing the difference between the current accumulated price and the stored one by the elapsed time, and then dividing again by 2**112, using the ratio method from the Decimal library, to get the output in price units.

However, the precision of the outcome could be increased by altering the order of the operations by multiplying the time elapsed and the 2**112 factor to then take the ratio of it, which internally multiplies first the numerator with the BASE constant.

Consider changing the order of the arithmetic operations to improve the outcome’s precision.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Won’t fix – effect on oracle is negligible, so we’d prefer to leave as is to increase readability by separating the numeric computation from the base conversion.

[L13] Centralized registry is not adopted in the whole code base

Having the Registry contract allows the protocol to have a unique source of information of the key components of the system.

Coupled together with the fact that the Registry contract is triggered by the governance, this should ensure a robust system to have system contracts depending on a registry where addresses can be updated anytime through a proposal.

However, not all contracts are using the Registry contract and its specific state variables. Some examples are:

  • The stake and timelock variables from the GovernorAlpha contract.
  • The reserve variable from the Incentivizer contract.

Consider using the Registry contract in all the contracts that need to read system contract addresses to improve consistency and to have a homogeneous functionality in the system.

Update: Partially fixed on pull request 8. The GovernorAlpha contract does not inherit the functionalities of a centralized registry from the RegistryAccessor contract.

[L14] Re-implementing ECDSA signature recovery

The castVoteBySig function from the GovernorAlpha contract includes an implementation of the ECDSA signature recovery function. This function is already part of the OpenZeppelin contracts, which has been audited and is constantly reviewed by the community.

Consider importing and using the recover function from OpenZeppelin’s ECDSA library not only to benefit from bug fixes to be applied in future releases, but also to reduce the code’s attack surface.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Won’t fix – don’t want to modify widely-used forked code unnecessarily.

[L15] New Oracle instance has to be deployed after a new StabilizerImpl deployment

The Oracle contract has the functionality to adapt and retrieve the prices for the ESD token. It is owned by the StabilizerComptroller contract.

To set the configuration on both contracts, the owner of the StabilizerComptroller contract has to call the setup function which would set as one the conversion between ESD and USDC but also it will call the setup function from the Oracle contract. There, the new pair will be created and it will be stored in the variables.

However, in case a new StabilizerComptroller is deployed, the setup of it will not be able to succeed by using the same Oracle contract, because a requirement that checks if the pair has been already setup for ESD will revert, preventing to set as one the moving average for that token.

Consider either allowing to set the initial value of the moving average in the StabilizerComptroller when deploying a new version of it without deploying a new Oracle contract, or documenting the reason to setup both contracts under the same call.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Won’t fix – this behavior is ok.

[L16] Uncommon ERC20 are not managed

The ReserveSwapper contract allows the Governance to list limit orders of ERC20 tokens.

There is no limitation on the type of ERC20 tokens that can be listed and swapped, but parallelly, tokens like the ERC20 Tether USDT can have implicit fees that are accounted when transferring. However, this internal fees are not being handled by the ReserveSwapper contract.

Therefore, the governance should be aware that the protocol currently does not fully support tokens that charge fees during transfers, and whitelisting such tokens can result in unexpected behavior, such as insolvency. If the protocol is expected to be compatible with these type of tokens, consider modifying the internal accounting mechanism to use the actual amount of assets deposited. One plausible approach would be to query the contract’s token balance before and after the execution of the token transfers to obtain the real amount of tokens deposited. For reference, consider how Compound’s protocol handles this scenario in their CErc20 contract.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Updated docs with a guide on acceptable ERC20 properties for governance.

[L17] Unhandled return value

The execute function from the GovernorAlpha contract is internally calling the executeTransaction function from the Timelock contract.

The executeTransaction function returns the data returned by the contract call in the returnData parameter, but this parameter is not read nor stored anywhere in the GovernorAlpha contract.

Whether the returnData is needed or not, consider reading or storing it. Alternatively, consider modifying the executeTransaction function to not return any parameter at all if it is not needed or documenting the reason to not use its returned value.

Similarly, the delegate function from the Stake contract is declared as not returning any value, but it is actually using the return keyword in its implementation.

Consider removing the return instruction.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Won’t fix – don’t want to modify widely-used forked code unnecessarily.

[L18] An account can trigger an approval event on behalf of another account

The StabilierToken contract implements the functionalities of the sESD ERC20 token.

One of those is the transferFrom function that allows to transfer tokens on behalf of another user when the allowance is properly set.

However, if a non-allowed user tries to transfer zero number of tokens on behalf of another another account by calling the transferFrom function, the transaction not only will succeed but it will trigger both Transfer and Approval event emission, meaning that the malicious user could disguise this harmless transaction as an approval on a non-owned account.

Consider requiring a non-zero value transfer when using the transferFrom function to prevent users from being deceived and to improve the readability of off-chain services that track event logs.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Won’t fix – will stick with current behavior to conform to OZs implementation of ERC20.

Notes & Additional Information

[N01] Not following the Checks-Effects-Interactions pattern

The Dollar contract extends the functionality of the ERC20Detailed and Permittable.

The transferFrom function check if the sender is allowed by the holder to send the tokens but this check is done after the transfer has been made.

Solidity recommends the usage of the Checks-Effects-Interactions Pattern to avoid potential security issues, such as reentrancy.

Although in this scenario it does not represent a possible security issue, consider always following the “Check-Effects-Interactions” pattern, thus checking the parameters before modifying the contract’s state.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Won’t fix – preserve for code clarity.

[N02] Gas optimization

There are some examples in the code base where gas consumption can be optimized by returning or failing earlier.

  • The requirement performed on Line 287 of ReserveComptroller.sol can be done after line 281 using the newBorrowed variable.
  • The order of lines 94-95 of StabilizerToken.sol can be inverted to fail earlier.

Consider reviewing the code base for occurrences like these and refactor the code to be more gas efficient.

Update: Partially fixed on pull request 7. Only the operation order in the StabilizerToken contract was changed.

[N03] Modifier could replace repeated requirements

In the GovernorAlpha contract there are certain functions that can only be called by the guardian address. These are to cancel a proposal, accept an admin, abdicate the guardian role, set the pending admin, and execute the pending admin process.

On all of these functions, the requirement is copied instead of using a modifier that restricts the call of the functions to only the guardian. This not only cost more at the time of the deployment but also renders the readability of the code.

Consider replacing all the guardian only-access requirements to a modifier that accomplishes the same functionality.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Won’t fix – don’t want to modify widely-used forked code unnecessarily.

[N04] Implicit and default values

In the code base, there are several occurrences of parameter’s values that imply a certain purpose.

In particular, uint(-1) and uint96(-1) are used in the Stake contract to indicate an infinite approval for token spender, or in the ReserveSwapper to indicate an unlimited order amount.

Similarly, the Pending status of the ProposalState struct from the GovernorAlpha contract is the default value of the enum and it is being used to tag a pending proposal status instead of having a non-existent proposal state.

To improve the code’s readability, consider replacing hardcoded values for explicit constants that properly describe their purposes. Consider also not using the default values for specific meanings, as default values are the ones that appear before an object is initialized, which may lead to confusion.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Won’t fix – don’t want to modify widely-used forked code unnecessarily.

[N05] Inconsistent coding style

In the code base, there are some inconsistencies in the style used for the code. Some examples are:

In the Incentivizer contract:

In the ReserveComptroller contract:

  • In line 183 it is used a variable to store the ESD address but it is not done the same on line 195 where the output from the registry is used directly. Furthermore, the IERC20 and IManagedToken interfaces are used for the same contract. In this case, consider merging and standardizing the two interfaces if they are used exclusively by the same contract.

In the GovernorAlpha contract:

  • In line 225, the execute function condenses the requirement of checking the status of the proposal in one line, however the cancel function does the same but in 2 lines.
  • Revert messages of the GovernorAlpha follow a design which is not used by all other contracts.

In order to improve readability, consider following a unique consistent style while coding the contracts.

Update: Partially fixed on pull request 18. The EmptySetSquad team statement for this issue:

ReserveComptroller Leaves as-is, the pattern being: don’t utilizes intermediary variables unless the variable would be accessed more than once in the resulting code.
GovernorAlpha Leaves as-is to not modify forked code unnecessarily.

[N06] Lack of indexed parameters in events

There are places in the code base where events defined in the contracts do not index any parameter. Some examples are:

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

Update: Partially fixed on pull request 6. Events on the GovernorAlpha contract are still not indexed.

[N07] Misleading or erroneous docstrings

In the code base, there are docstrings that may confuse the user or that are incorrect. Some examples are:

  • The IComptroller interface from the ReserveVault contract has a docstring that states ICErc20 where it should be IComptroller.
  • Line 133 from ReserveState.sol should say “Redemption tax”.
  • Line 84 from ReserveComptroller.sol states “Rhe” where it should be “The”.
  • Line 85 from ReserveVault.sol states “…rewards the external protocol” where it should be “…rewards from the external protocol”.
  • Lines 112-115 from the StabilizerComptroller.sol are the docstrings of the setup function but those are copied from the docstrings of the rate function below.

In order to improve readability, consider fixing all incorrect docstrings in the code base.

Update: Fixed on pull requests 5 and 1.

[N08] Several contracts developed per file

In the code base, the StabilizerState.sol file together with the ReserverVault.sol, ReserverState.sol, Migrator.sol, GovernerAlpha.sol, and Interfaces.sol files all present multiple contracts or interfaces definitions inside of the same file.

To improve understandability and readability, but also to have a more modular code base, consider having one contract or interface per Solidity file.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Won’t fix directly – significantly cleaned up via pull request 19 and pull request 20.

[N09] Naming issues

In the code base, there are several occurrences of unclear or confusing names. For example:

  • The GovernerAlpha.sol file defines a contract called GovernorAlpha.
  • The getPartial function’s name of the Decimal library doesn’t reflect correctly the functionality of the function.
  • The name of the _paid mapping of the Incentivizer contract doesn’t suit with the purpose, it is used to track the latest reward per unit instead of the amount of paid rewards as suggested by its docstring.

To improve consistency and readability of the code base, consider changing variable, function, and file names to better reflect their intentions.

Update: Partially fixed on pull request 4. The getPartial function still has a name that does not reflect its functionality.

[N10] Declare uint as uint256

In the code base, there are several places where uint is used instead of uint256. Some examples are:

To favor explicitness, consider changing all instances of uint to uint256.

Update: Acknowledged. The EmptySetSquad team statement for this issue:

Won’t fix – don’t want to modify widely-used forked code unnecessarily.


No critical and 2 high vulnerabilities were found among other issues with lower severities. Recommendations and comments have been provided to improve code quality and readability and some security measures have been recommended to improve the overall health of the system.