Holdefi Audit

March 29, 2021|In Security audits|By OpenZeppelin

Update: OpenZeppelin completed the audit of the Holdefi platform and delivered the findings in April 2020, but the publishing of the report has been delayed until March 2021. As the DeFi ecosystem has evolved over the last year, OpenZeppelin strongly recommends another audit be conducted on the codebase prior to a mainnet launch.

The fixes to the issues identified in this report have not been reviewed by OpenZeppelin.


Holdefi is a lending platform where users can hold their assets and earn interest or borrow tokens and repay them after a specific period of time. Anyone can supply assets to Holdefi’s liquidity pool and immediately begin earning interest.

The Holdefi team asked us to review and audit the smart contracts for their DeFi protocol. We examined the code, and here we publish our findings.

The audited commit is f4df394d7cf6df347b1f1e9af8e2676c5933c2c9 and the files included in the scope were Holdefi, HoldefiPauser, HoldefiPrices, HoldefiSettings, CollateralsWallet, and Ownable. The SafeMath, SampleToken and SimpleMedianizer were not included in the scope.

Additionally, it should be noted that the financial template design depends on a number of economic and game-theoretic arguments and assumptions. These were explored to the extent that they clarified the intention of the code base, but we did not audit the mechanism design itself.

All external code and dependencies were assumed to work as intended.

Privileged roles

The Holdefi team currently administers all aspects of the protocol to decide which assets can be used and how price feeds and rates are set. They also control various economic parameters, such as the size of the incentive used to encourage third parties to liquidate under-collateralized loans or which markets will have a promoted rate. All sensitive actions that owners and privileged roles can carry out (the most sensitive ones listed below) are instant and forced, with no opt-in nor opt-out mechanism for users of the protocol.

The owner of the Holdefi contract can:

  • Withdraw the liquidation and promotion reserves.
  • Set the promotion rate.
  • Set and fix the address of the HoldefiPrices contract.

The owner of the contracts that inherit from the HoldefiPauser contract can:

  • Set the pauser’s address.
  • Pause and unpause functionalities.

The owner of the HoldefiPrices contract can:

  • Add stable coins.
  • Set the price of an asset.

The owner of the HoldefiSettings contract can:

  • Set the address of the HoldefiContract.
  • Set the rates for borrow, suppliers share, value to loan, penalty, and bonus.
  • Add markets.
  • Deactivate markets.
  • Add collaterals.
  • Deactivate collaterals.

These decisions and parameters can significantly affect the usefulness and safety of the system. It is unclear whether a single externally owned account or a multisig account will represent these roles at the time of audit. As for now, it requires users to fully trust the Holdefi team with these privileged roles.

Update: While we were auditing this project, the Holdefi team found the following issue:

The Holdefi contract makes use of the HoldefiPrices and the HoldefiSettings contracts to whitelist the assets allowed in the project. In those contracts, the intrinsic characteristics of the assets such as the price or the borrow power for a particular collateral asset are stored.

When someone has submitted some collateral asset using the collateralize functions, the value is added to the account’s balance by using the ERC20 transferFrom function while using ERC20 tokens, and with the msg.value value specified in the transaction for ETH.

A problem might happen if the owner of the HoldefiPrices contract, which is currently the one in charge of updating the prices of the project in a centralized manner, uses the same number of digits to express the price of every asset. In that case, because different ERC20 tokens can have different number of decimals, when the Holdefi contract needs to perform a borrow to a collateralized user, the outcome could be wrong.

In the borrow scenario, the current borrow power is given by:

borrowPowerScaled = A*(balance(collateral) * price(collateral)) - ∑ balanceBorrows(market, collateral) * price(market)

Where A = ratesDecimal/valueToLoanRate(collateral). In the same way, a new borrow would be calculated as:

assetToBorrowValueScaled = amount(market) * price(market)

Which only succeeds if borrowPowerScaled > assetToBorrowValueScaled.

This implies that a higher balance for one of the collaterals, due to a higher decimals value for that ERC20 token, could allow a greater borrow in real value.

Nevertheless, because all values are calculated (at some point) by the number of tokens times its price, and because currently the oracle is updated only by its owner, the owner could compensate the decimals by adding or subtracting zeros in the price under the following formula:

fixedPrice(market) = price(market) * 10**(18 - tokenDecimals) * priceDigits

Where tokenDecimals is the decimals used for the ERC20 token and priceDigits is the number of digits used to scale the price.

Furthermore, because there might be ERC20 stable tokens that do not have 18 decimals, the addStableCoin function from the HoldefiPrices contract sets up wrongly a stable asset with a hardcoded 18 decimals value into the contract.

Because the oracle is controlled by the Holdefi’s owner, consider shifting the price of the assets to compensate the difference in ERC20 token decimals, and taking into account that the EIP20 Standard marks the decimals function as optional, allowing that some mainnet ERC20 tokens may not have a decimals function to call.

Additionally, consider asking as parameter the number of decimals for non 18 decimals ERC20 stable tokens when setting up the asset into the contract.

Moreover, consider refactoring the code to include the decimals as part of the calculation, which could allow the usage of an external oracle too.

In addition, consider explicitly documenting how the difference in decimals is handled in the project, and also consider implementing a bug bounty program.

Critical Severity


High Severity

[H01] Owner can bypass time checks in markets and collateral assets

The HoldefiSettings contract is in charge of managing some of the most important actions that the admin of the system can perform, such as add and remove markets, add and remove collateral assets, set a borrow rate and set a suppliers share rate for a given market, and finally set the value to loan rate, set the penalty rate and set a bonus rate for a particular collateral asset.

Because these actions are critical in the financial behavior of the project, this contract inherits functionalities from the Ownable contract, and all these mentioned functions are guarded by the onlyOwner modifier so the owner is the only one that can modify the system’s attributes, and add or remove assets from the project.

Also, because quick changes in the parameters may harm users while using the system, there is a time-off period in which the owner cannot increase its values for a particular market or collateral.

Nevertheless, there is a feasible scenario where the owner can easily bypass this process by removing and re-adding an already existent market or collateral. For instance, given a specific market, the owner can call the removeMarket function, which will only set the respective isActive flag for that market as false, and then call the addMarket function for that same market but with some new parameters that the owner may use for their own benefit.

Additionally, if these two calls are done in order using a high gas price and the first one with an even higher value, and then these frontrun a user’s transaction performed to the Holdefi contract, the owner could potentially benefit from these modifications even in the short term.

This same procedure also applies similarly to the analogous addCollateral and removeCollateral functions that modify the parameters of the whitelisted collaterals.

Consider adding a time check to apply the same logic of the time-off period to a previously removed market or collateral so the owner cannot bypass the time restrictions while changing the parameters.

[H02] Markets are not being properly removed from the markets list

In the HoldefiSettings contract there are two data structures to track markets: marketsList which is an array of addresses, and marketAssets, which is a mapping that describes the properties of each market. Additionally, there are two functions to manipulate these markets: the addMarket function which adds new markets, and the removeMarket function which removes an already existent market.

The problem resides in that the removeMarket function does not remove a market from both mentioned data structures, as it only sets a given market as not active in the Market struct, but does not remove it from the marketsList array. This means that, when the getMarketsList function is called, it will list already removed markets, showing them as valid and active markets.

This could lead into an undesired manipulation of collaterals of a borrower in a specific market, that could generate market debts for inactive collaterals in that market, and could trigger other operations such as updating the promotion reserve and therefore update a market’s supply index for a specific collateral in an inactive market. Also, this behavior of having a removed market that is still active could be confusing for the end-users.

Consider renaming the removeMarket function to deactivateMarket, to make its behavior clear. On all the functions that query marketsList consider checking if the market is inactive. If the function supports or requires to take into account inactive markets, consider clearly documenting this.

Alternatively, consider using different state variables to differentiate from active and inactive markets, instead of leaving them in a state that is not clearly defined.

Update: Not fixed. Holdefi’s statement for this issue:

We calculate the borrow-value of each account in “getAccountTotalBorrowValue” function. This function is using “marketsList” for calculating the borrow-value. If we remove a market from “marketList”, the borrow-value of that token for the users that borrowed it, will not be calculated.
We did not remove the market from “marketList” with awareness.
Actually removing market or collateral in Holdefi stops users from depositing new tokens to contract but withdrawing and other functionalities are not changed because we don’t want our users losing their tokens.
Also updating the supply index and promotion reserve doesn’t have any bad effect on the platform and these functions are not “sensitive operations“. They just update index or reserve till current time.
You suggested that we should check whether a market is active or not in the “clearDebts”. But if we do that, the platform will have problems and we will not consider the users that borrowed that market before.

We have updated our suggestions to make them clearer.

[H03] Users can add non-existent ERC20 tokens into the promotion reserve

The Holdefi contract implements most of the functionalities of the Holdefi’s protocol, such as the supply of assets into the system, add collateral, and to borrow other assets based on the collateral power that the account has, among others.

In particular, the depositPromotionReserve function, allows any account to deposit ERC20 token assets into the promotion reserve for a particular market.

The problem is that the depositPromotionReserve function does not check whether the market that the caller is trying to interact with is actually whitelisted by checking the isActive flag which enables the possibility to pass any address (except the zero address) as a possible market.

Here, an attacker could create a new contract that implements a simple transferFrom function that always returns true, so the requirement that checks the output of the real transferFrom function can be bypassed. By doing this, the attacker would be calling the depositPromotionReserveInternal function with a fake market address and number of tokens.

This last function will later call several other functions from the same and other contracts, such as the getCurrentPromotion function and the getInterests function from the HoldefiSettings contract, but because the code also abuses the default zero values in several parts, all checks will be bypassed, including the protections that the usage of the SafeMath library provides, ending up in writing in storage not only a fake deposited value of the particular ERC20 token market but also it will update the timestamp from when the inexistent assets were deposited, emulating the behavior of a real ERC20 token.

Consider restricting the call to the whitelisted markets by using the already implemented isActive flag, and restricting who is able to deposit ERC20 assets into the promotion reserve.

Update: Not fixed. Holdefi’s statement for this issue:

You have 2 suggestions for this issue: 1-implementing isActive flag 2-restricting who is able to deposit ERC20 assets first suggestion is good and we will implement it. But restricting users to deposit into promotion reserve will not change anything. Users can deposit their assets into promotion reserve and it’s good for us. Also updating indexes is not bad for the protocol.

Medium Severity

[M01] Owner can overrule pauser actions

The HoldefiPauser contract implements the functionality to pause specific functions at will in case a problem appears in the platform. The only accounts that can perform such task are the owner and the pauser accounts.

Nevertheless, the time-off period that the pause event has to achieve is modifiable only by the owner by calling the setPauseDuration function and if the owner decides to suppress the duration by setting it as zero, the isPause function will always return true, no matter what the pauser account does.

Consider setting a minimum duration for the time-off period to prevent that the pauser account loses its powers.

[M02] List of markets can endlessly grow

In the HoldefiSettings contract, the addMarket function is used to introduce new markets to the system by adding them into the marketsAssets mapping and in the marketsList array.

Given that the owner of the contract can add markets without any limit, and given that the removeMarket function does not remove markets properly, as it was pointed out in the issue “[H02] Markets are not being properly removed from the markets list”, the marketsList array can grow endlessly. Then, when the array is iterated through, it would cause an out of gas error, as the loop would be too large to be handled in a single transaction. This would happen in the following scenarios:

Consider limiting the size of the marketsList array to prevent out of gas errors. In addition to this, when removing a market using the removeMarket function, consider not only deactivating it in the marketsAssets struct, but also removing it from the marketsList array.

Update: Not fixed. Holdefi’s statement for this issue:

We explained it in H02. Your suggestion to remove the market from marketsList not only can’t solve the issue but also will damage the platform.

[M03] Anyone can set the Holdefi contract’s address in the CollateralsWallet contract

The CollateralsWallet contract is in charge of letting the Holdefi contract to withdraw a collateral asset if needed through the withdraw function. For this, the holdefiContract storage variable must be set first through the setHoldefiContract function, which is independent from the CollateralsWallet contract creation.

The problem resides in the fact that the setHoldefiContract function does not have any restriction and can be called by any address and, thus, the holdefiContract storage value can be set by any external actor right after the contract creation, and will be able to call the withdraw function afterwards and steal the tokens held by the CollateralsWallet contract in any ERC20 contract, if there are any in the first place.

Consider setting the holdefiContract storage variable on the contract creation instead of setting it in a separate function, or consider using the Ownable contract for setting an owner of the CollateralsWallet contract so the setHoldefiContract can only be called by a trusted actor.

[M04] Insufficient incentives to liquidator

The Holdefi contract implements the liquidation process for those accounts that may have an under-collateralized balance or that may have been inactive for a whole year without interacting with the project.

The liquidation process is a very important part of every DeFi project because it allows to extinguish the problem of having the whole system under-collateralized under critical conditions of the market, and it needs a design that incentivizes its speed of execution.

Nevertheless, the only incentive that a liquidator has when calling the liquidateBorrowerCollateral function is to update its last time of activity. Not only that, but also it only updates the latest activity time for the collateral type involved in the liquidation process and not all the activity times of all collaterals. Liquidators that do not have the collateral involved in the contract, or any collateral at all, will not have any benefit for calling the liquidation process.

Furthermore, given that the cost of calling the liquidateBorrowerCollateral function will be high due to the for loop in the clearDebts function, as it was pointed out in the issue “[M02] List of markets can endlessly grow”, and even though buying discounted collateral assets could be considered as an incentive to the liquidators, the liquidators have a low incentive to reduce the liquidable accounts’ borrows of the platform. This is because the account liquidation process is detached from the liquidated-collateral asset purchase, making that between those function calls, a third party could front-run the transaction from the liquidator that calls the buyLiquidatedCollateral function, by increasing the gas price, just after the transaction to theliquidateBorrowerCollateral function was mined. That way, the liquidator would end up paying for the expensive liquidation process, without receiving any benefit.

Consider improving the incentive design to give the liquidators higher incentives to execute the liquidation process, or merging the functionalities from the liquidateBorrowerCollateral and the buyLiquidatedCollateral functions under one.

Update: Not fixed. Holdefi’s statement for this issue:

A 5% discount for buying collateral assets can incentivize the liquidator to liquidate collaterals and then buy it.

We have updated our suggestion to make it clearer.

[M05] Asset price can be reset by owner

The addStableCoin function of the HoldefiPrices contract is used to introduce new token prices to the Holdefi system with an initial price of priceDecimal, that will later be used for performing sensible operations such as withdrawing collaterals, borrowing market assets, and liquidating a borrower’s collateral on the Holdefi contract.

The problem resides in that the addStableCoin function does not check whether an asset has already been added to the system or not, leading to scenarios where the owner of the contract could reset its value by calling this function multiple times, overwriting the current price of a given asset with the initial priceDecimal value.

Consider checking whether a given asset price has already been added to the system by checking its existence in the assetPrices mapping before calling the setPrice function inside the addStableCoin function.

[M06] Markets can become insolvent

When the value of all collateral is worth less than the value of all borrowed assets, we say a market is insolvent. The Holdefi codebase can do many things to reduce the risk of market insolvency, including: prudent selection of collateral-ratios, incentivizing third-party collateral liquidation, careful selection of which tokens are listed on the platform, etc. However, the risk of insolvency cannot be entirely eliminated, and there are numerous ways a market can become insolvent, for instance:

  • The price of the underlying (or borrowed) asset makes a big, quick move during a time of high network congestion — resulting in the market becoming insolvent before enough liquidation transactions can be mined. A similar situation was experienced at the beginning 2020 in the Ethereum network, and specially in Maker’s pricing oracles.
  • The liquidation incentives are not as strong they should be, allowing the accumulation of under-collateralized borrows.
  • The price oracle temporarily goes offline during a time of high market volatility. This could result in the oracle not updating the asset prices until after the market has become insolvent. In this case, there will never have been an opportunity for liquidation to occur.
  • The admin or oracle steals enough collateral that the market becomes insolvent.
  • Administrators list an ERC20 token with a later-discovered bug that allows minting tokens arbitrarily. This potentially corrupt tokens can be used as collateral to borrow funds that were never intended to be used as a repayment.

In any case, the effects of an insolvent market could be disastrous. It may result in a “run on the bank” situation, with the last suppliers out losing their money.

This risk is not unique to the Holdefi project. All collateralized loans (even non-blockchain loans) have a risk of insolvency. However, it is important to know that this risk does exist, and that it can be difficult to recover from even a small dip into insolvency.

Consider adding more targeted tests for these scenarios to better understand the behavior of the protocol, and designing relevant mechanics to make sure the platform operates properly. Also consider communicating the potential risks to the users if needed.

[M07] Old owner can frontrun the ownerChanger

The Ownable contract is a modified version of the OpenZepplin Ownable contract where a third actor is included: the ownerChanger.

The ownerChanger is can accept an ownership transfer from the old owner to the pendingOwner.

First, to perform a successful ownership transfer, the old owner needs to call the transferOwnership function passing the address of the new desired owner, and then the ownerChanger needs to accept it by calling the acceptTransferOwnership function.

A scenario could happen in which the old owner A tries to deceive the ownerChanger by calling the transferOwnership function with the address of the new owner B, address that the ownerChanger would approve, but right after the ownerChanger sends the transaction calling the acceptTransferOwnership function, the old owner A calls the transferOwnership function again with a higher gasPrice and passing another address C as the parameter. In that case, this last transaction would be mined first and just after that the acceptTransferOwnership function would confirm the ownership transfer to the undesired address C.

Although it is very unlikely that the old owner would perform such attack, consider changing the acceptTransferOwnership function to ask the ownerChanger the address of the new owner so it can be compared to the pendingOwner submitted by the old owner.

[M08] Excessive indirection

Due to the massive factorization of certain behaviors under the same function as addressed in the issue “[L08] Overcomplicated return values”, the level of indirection present severely degrades the readability of the code.

To give an example, if a liquidator calls the liquidateBorrowerCollateral function of the Holdefi contract, that same transaction would end up triggering a call to the clearDebts function, which then would call the updateSupplyIndex function, which would call afterwards the getCurrentInterestIndex function, and finally jump to the HoldefiSettings contract to call the getInterests function.

Right after the updateSupplyIndex call ends, the updatePromotionReserve would be called, which would call the getCurrentPromotion function, and would end up jumping again to the HoldefiSettings contract to call the getInterests function.

Note that the example of excessive indirection mentioned above is not the only one triggered by the liquidateBorrowerCollateral function, but just one of many.

While this does not pose a security risk per se, it introduces a lot of complexity to important sections of the code, is error prone and difficult to maintain in the long term.

Consider reducing excessive indirections throughout the code base by simplifying each function, so that they can fulfill one single and clear purpose, and also avoid over-factorizing behaviors in order to improve the readability and maintenance of the project. If there is a reason or limitation that forces this complexity, consider documenting it in the code.

Update: Not fixed. Holdefi’s statement for this issue:

As you mentioned, this does not pose a security risk per se. And it’s not a medium severity issue. It’s just a suggestion.
Also, we can use the limited number of values in each function. If we want to simplify functions, we are faced with this error: Stack too deep, try removing local variables.

We have updated our suggestion to make it clearer.

[M09] Not using OpenZeppelin contracts

OpenZeppelin maintains a library of standard, audited, community-reviewed, and battle-tested smart contracts.
Instead of always importing these contracts, the Holdefi project reimplements them in some cases, while in other cases it just copies them.

This increases the amount of code that the Holdefi team will have to maintain and misses all the improvements and bug fixes that the OpenZeppelin team is constantly implementing with the help of the community.

In particular, the following contracts and libraries are being reimplemented or copied:

Consider importing the OpenZeppelin contracts instead of reimplementing or copying them. These contracts can be extended to add the extra functionalities required by Holdefi.
Consider always using the full ERC interfaces so that obviously non-compliant implementations can be easily excluded.
Consider updating the library to its latest stable version for Solidity 0.5.16.

Update: Not fixed. Holdefi’s statement for this issue:

If we use exactly OpenZeppelin contracts, we will miss some added features like ownerChanger. But we need them and can’t remove them. For ERC20 interface, we don’t need all functions so web just use a reduced version of IERC20.sol interface.

We have updated our suggestion to make it clearer.

[M10] Lack of events emission after sensitive actions

Throughout the Holdefi project codebase, there are several cases where sensitive actions are performed but there are no events being emitted, or the existent emitted events miss important parameters.
Our suggestions are:

In the CollateralsWallet contract:
– The withdraw function should emit a CollateralAssetWithdrawn event
– The fallback function should emit a TransferReceived event

In the Holdefi contract:
– The updatePromotionReserve function should emit a PromotionReseveUpdated event
– The withdrawLiquidationReserve function should emit a LiquidationReserveWithdrawn event
– The withdrawPromotionReserve function should emit a PromotionReserveWithdrawn event
– The UpdateBorrowIndex event should print the borrowRate received by the getCurrentInterestIndex function

In the HoldefiPauser contract:
– The pause function should emit a OperationPausedevent
– The unpause function should emit a OperationUnaused event
– The setPauser function should emit a PauserSet event
– The setPauseDuration function should emit a PauseDurationSet event

In the Ownable contract, the constructor should emit an OwnershipTransferred event

In the HoldefiPrices contract, the addStableCoin function should emit a StablecoinAdded event

As a general rule, consider emitting events appropriately when performing sensitive changes to storage variables, and consider emitting the most important variables involved in those changes.

[M11] Missing docstrings

All the contracts and functions in the Holdefi’s codebase lack documentation. This hinders reviewers’ understanding of the code’s intention, which is fundamental to correctly assess not only security, but also correctness.

Additionally, docstrings improve readability and ease maintenance. They should explicitly explain the purpose or intention of the functions, the scenarios under which they can fail, the roles allowed to call them, the values returned, and the events emitted.

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

Update: Not fixed. Holdefi’s statement for this issue:

This is not a bug. This is just a suggestion

Low Severity

[L01] Transfer method is used to send ETH

The Holdefi platform uses the CollateralsWallet contract to store the collateral assets of the project. There, the contract implements functionalities such as withdrawing the collaterals or accepting ETH through the payable fallback function. To restrict who can call these functions, the caller’s address with the holdefiContract address is compared.

Meanwhile, the Holdefi contract allows users to deposit assets as collaterals to then increase their collateral balance which allows them to borrow other assets of the platform.

In particular, if someone deposits ETH, the user has to call the collateralize payable function while sending the amount of ETH they want to add in the same transaction. Once the Holdefi contract checks if the ETH market is active, it transfers the ETH to the CollateralsWallet contract and stores the balance in an internal mapping.

The method used to transfer the ETH to the CollateralsWallet contract is a low level call, which is the current correct way to transfer ETH between addresses due to the fact that the transfer method relies on the fact that gas costs are always constant, but since the Istanbul hard fork, these gas prices cannot be considered constants and contracts that use them may break in the future.

Nevertheless, in all other ETH transfers to external accounts or other contracts, the transfer method is used. Some examples are the ones in L214, L325, L397, and L778 from the Holdefi contract.

Consider using the low level call to send ETH as it was implemented in L254-L255 or, even better, replacing all the current implementations to send ETH with the OpenZeppelin’s sendValue method.

[L02] Collaterals and markets can be updated after being deactivated

The HoldefiSettings contract defines a mapping of collateralAssets to store information about collaterals, and a mapping of marketAssets to store information about markets. Even though in both data structures there is an isActive flag defined to check whether a collateralAsset or marketAsset is active or not, it is not being used on the setValueToLoanRate, setPenaltyRate, setBonusRate, removeMarket, setSuppliersShareRate, and the setBorrowRate functions, leading to scenarios where deactivated collaterals and markets can be updated, and undesired event emissions will be triggered.

As addressed in the issue “[H02] Markets are not being properly removed from the markets list”, consider renaming the functions to reflect the current functionality of the code, and adding a third state for those markets that are still operational but are not active, while checking the state of a given collateral or market at the beginning of the functions mentioned above.

Update: Not fixed. Holdefi’s statement for this issue:

Removing a market o collateral in the Holdefi means that nobody can supply or borrow or add collateral. But old users can withdraw supply or repay borrow. So we can set new rates (VTL rate, bonus rate, …) for them.

We have updated our suggestion to make it clearer.

[L03] Borrowers are allowed to operatate after the maximum period has passed

The Holdefi contract establishes a maximum period of time in which a borrower can be sure that his assets will not be liquidated. This period is defined as the number of seconds in a regular year.

Nevertheless, this restriction is not being applied on all the functions, and it is only used as a limit in the liquidateBorrowerCollateral. This could lead into a hypothetical scenario where a borrower could continue with his borrowing for a period greater than that year in the case where there are no liquidators performing their liquidation duty.

Additionally, a borrower in such condition who has an account which has been a whole year without activity could frontrun a liquidator when the transaction that calls the liquidateBorrowerCollateral function enters into the mempool, maximizing the period of time for his position beyond the established limit.

Consider adding requirements in all functions related to the financial aspect of the contract to restrict the borrower’s actions after the maximum period of time has been achieved instead of relying on the liquidators’ actions only.

Alternatively, if there is a good reason for this design consider documenting it in the docstrings of the affected functions.

Update: Not fixed. Holdefi’s statement for this issue:

In this case, there is no problem that borrowers are allowed to operatate just after the maximum period has passed. His/her account will be liquidated in the first transaction after this period. The reason that we added this time is that if the borrower dies or loses his/her wallet or any other reason that can not get his/her debt back into the platform, suppliers be sure that their tokens will be back. There is no problem if borrower is alive and can perform any action with Holdefi contract after one year.

We have updated our suggestion to make it clearer.

[L04] OwnerChanger cannot renounce its role

The role management scheme implemented in the Ownable contract does not include a way for the ownerChanger to renounce the role they have been granted. This might become problematic in a scenario where the account wishes to renounce the role after the trusted device holding the private keys has been compromised.

Also, in the case where the current owner may want to transfer its ownership with the transferOwnership function, the ownerChanger could reject every single transfer at his will by not calling the acceptTransferOwnership function, and as the ownerChanger role is not transferable, the owner role transfer operation could get compromised.

Consider using multisig accounts for both roles to prevent that one of them becomes compromised, and adding the option to renounce the ownerChanger role if needed.

[L05] Pauser accounts can reset the pause period indefinitely

The HoldefiPauser contract implements a pausable functionality for certain cases. Each one of them are assigned to a specific index. Then, the timestamp of when a pause action has been triggered for a specific case is tracked in the paused array by using its index.

This feature provides child contracts with a system overhaul in cases that an unexpected event occurs and part of the code needs to be stopped. This feature can only be called by the owner or the pauser, but on the other hand, the unpause function can only be called by the owner.

Nevertheless, if a particular functionality has been paused, in which a pauseDuration should be waited to have the paused functionality back, the pauser can re-call the pause function and reset the timer for that functionality, being possible to extend indefinitely the paused period. If this duality of having a bounded period that can be extended is the intended, the same could be implemented with a better design using a flag variable instead of a timestamp variable.

Consider modifying the functionality to prevent multiple resets of the pause period by the pausers accounts, or documenting this if it is the expected behavior.

[L06] Parameter’s time-off periods are uneven

The HoldefiSettings contract uses a 10-day time-off period to prevent the owner to perform actions such as an increase in the borrowRate, the suppliersShareRate, the valueToLoanRate, and the penaltyRate.

Nevertheless, if the owner accidentally changes one of these values and sets up a lower value by mistake, a 10-day time-off period will have to be awaited before the parameters can be corrected, possibly affecting the finances of the platform in a drastic manner.

In addition to this, the awaiting period cannot be changed even by the owner. This means that once the platform is launched, if this period is too high, it will not allow the platform to compensate the dynamics of the market quickly enough.

Consider simulating and documenting the selection of these unchangeable values, and taking extra caution before updating these parameters.

Update: Not fixed. Holdefi’s statement for this issue:

It’s not a bug. It’s just a suggestion and a warning. We have to be careful about setting these parameters. But these parameters must exist for users to trust us and prove to them that we can’t manipulate the platform.

[L07] Unneeded public visibility in some functions

In the Holdefi codebase, there are situations in which functions have a public visibility although those are not called by any other function from the same contract. Some of them are:

To favor readability and to reduce the attack surface, consider reducing the visibility of these functions and any similar case to external, and consider reducing the visibility of the marketAssets variable if the getMarket function is not removed from the codebase.

[L08] Overcomplicated return values

Throughout the project’s codebase, functions that return several variables are implemented, but when calling these functions, only a few or just one return parameter is used.
Some examples are:

  • The getCollateral function in the HoldefiSettings contract returns the isActive, valueToLoanRate, penaltyRate, and bonusRate attributes, but when this function is called in the Holdefi contract, only one of these variables is accessed, such as in the collateralize, withdrawCollateral, and borrow functions.
  • The getCurrentInterestIndex function in Holdefi contract returns the supplyIndex, supplyRate, borrowIndex, borrowRate, and currentTime attributes, but only a few of these variables are being accessed, such as in the updateSupplyIndex and updateBorrowIndex functions.

Even though this does not pose a security risk, it is very difficult to understand which variables are being accessed when calling a function without checking its signature. Additionally, returning big data structures will increase the gas costs, leading to higher prices when executing transactions.

Consider identifying all the functions that follow this pattern and modularize them into smaller ones that return at most one variable each.

[L09] Lack of indexed parameters in events

Throughout the Holdefi’s codebase, none of the parameters in the events defined in the contracts are indexed.

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

[L10] Lack of input validation

Throughout the codebase, there are certain functions and calculations that do not perform validation checks to ensure the validity of the inputs. Some of them are the following ones:

  • The withdraw function in the CollateralsWallet contract does not check that the recipient is not the zero address.
  • The setPrice function in the HoldefiPrices contract does not check whether the newPrice is the same as the old price, triggering an event without any new relevant information.
  • The setPauseDuration function in the HoldefiPauser contract does not check the newPauseDuration parameter, which could be zero or a very long period of time, possibly locking important functions of the Holdefi system.

Even though this issue does not pose a security risk, the lack of validation on user-controlled parameters may result in erroneous transactions considering that some clients or owners may default to sending null parameters if none are specified. Consider always adding validation checks to ensure that the parameters are always in the expected range of values.

[L11] Semantic overload

Throughout the codebase, there are cases in which a single variable has two purposes, and, based on which its value is, the code can perform differently. For example:

In the HoldefiSettings contract, the properties of a market or collateral are stored inside structs. These structs have a flag called isActive which is raised when a market or collateral is added to the whitelist, and flagged down when the same asset is removed from the whitelist.

Nevertheless, because the parameters of the assets are not erased after the removeMarket function is called, the isActive variable is used to check not only if the market exists but also if the market is active. The same analogous problem occurs with the collateral and its respective functions.

In the HoldefiPauser contract, an array to keep track of the timestamps of the moment in which the pause function for each functionality was triggered is used, but also this array is used as a flag to know when the functionality is unpaused by checking the array’s getter.

This is known as Semantic Overload. If the multiple meanings of the variables and states are not totally clear when making changes to the code, it can introduce severe vulnerabilities. We strongly discourage its usage if possible.

Consider explicitly setting independent flags to represent the state of the markets and collaterals instead of using the same variable for different purposes.

Update: Not fixed. Holdefi’s statement for this issue:

You said that this is Semantic Overload and it may cause issues when it is not used properly, but you didn’t explain that what is the issue.

We have updated our suggestion to make it clearer.

[L12] Default variable declaration values are used during calculations

In the codebase of the project, there are several places in which the returned variable is declared in the function definition without the explicit return instruction within the function’s body, as addressed in the issue “[N06] Named return variables”, but also there are places where the local variable is not assigned with an initial value.

Usually, this does not bring problems because the default value of a variable would be overwritten by another one during the code execution, but in other cases, depending on how this variable is used, an issue may appear.

In the getAccountTotalBorrowValue function from the Holdefi contract, totalBorrowValueScaled is declared to represent the function’s return value. This variable is then used in a for loop to accumulate the value of all borrows from a particular account, but during the first iteration, the default value of this variable is used for the calculation.

Similar cases can also be found in the totalDebt, assetPrice, and assetValueScaled variables from the getAccountTotalBorrowValue function, and in many other functions.

Although it does not represent a problem in the current scenario, consider always declaring variables with an initial value to reduce the attack surface.

[L13] Use of magic constants

There are several occurrences of magic constants in Holdefi’s codebase. Some examples are:

Line 617, the 1 being added to the deltaInterest variable
Line 655, the 500 subtracted to the valueToLoanRate variable
– Lines 161, 174, 234, 248, 261, 298, 298, 298, 359, 382, 429, 464, and 481 when calling the whenNotPaused modifier with a parameter

Even though the meaning of some of this constants are mentioned as comments in the HoldefiPauser contract, there is no reference of them in the contract where the wheNotPaused modifier is being used, which makes the code harder to understand and maintain.

In addition to this, the references in the comments mentioned above are not consistent with the list of function codes for pausing operations in the specification, where the operation 3 is being skipped in the whitepaper.

Consider defining a constant variable for every magic constant (including booleans) in the contract where they are used, giving it a clear and self-explanatory name. For complex values, consider adding an inline comment explaining how they were calculated or why they were chosen. All of this will allow a better readability, easing the code’s maintenance.

[L14] Tests not passing successfully

The testing suite finishes with three failing tests, two on the AdminFunctionTests.js file and one on the OwnableTests.js file.

Although the test suite was left outside of the audit’s scope, please consider thoroughly reviewing the test suite to make sure all tests run successfully. Furthermore, it is advisable to only merge code that neither breaks the existing tests nor decreases coverage.

Update: Not fixed. Holdefi’s statement on this issue:

These fails are because of very little time difference, and it’s not a bug. This will be pass if you rerun it. Some of our calculations are based on timestamp and because of problem with exactly syncing with blockchain (local, testnet or mainnet), sometimes some tests will fail because of minor differences.

[L15] README file is empty

The README.md of the Holdefi project has no information about what is the purpose of the project nor how to use it. README files on the root of git repositories are the first documents that most developers often read, so those should be complete, clear, concise, and accurate.

Consider following Standard Readme to define the structure and contents for the README file.

Also, consider including an explanation of the core concepts of the repository, the usage workflows, the public APIs, instructions to test and deploy it, and how the code relates to other key components of the project.

Furthermore, it is highly advisable to include instructions for the responsible disclosure of any security vulnerabilities found in the project.
Consider adding a method for secure and encrypted communication with the team, like an email address with its GPG key.

Update: Not fixed. Holdefi’s statement for this issue:

It’s not a bug as well. We will add information in the readme file of course.

Notes & Additional Information

[N01] Variables declared as uint instead of uint256

To favor explicitness, consider changing all instances of uint into uint256 in the entire codebase.

[N02] Repeated access control in the code

The CollateralsWallet contract is used to store the collateral assets of the project and it implements a function to set the Holdefi contract’s address, a function to withdraw the collateral, and a payable fallback function that allows deposits of ETH into the contract.

Except from the first mentioned function which can only be called once, both the withdraw and the fallback functions check whether the caller is the Holdefi contract or not. This functionality could be factorized into a onlyHoldefi modifier as it is done in the Ownable contract instead of implementing the require statement in each function.

Consider creating a onlyHoldefi modifier and replacing the require statements in both functions with the modifier.

[N03] Not following the Checks-Effects-Interactions pattern

Throughout the project’s codebase, there are situations in which the code is not following the check-effect-interaction pattern that helps to protect against reentrancy issues, such as in the setBorrowRate function or in the setSuppliersShareRate function from the HoldefiSettings contract.

Although in the codebase these particular cases do not pose a security risk, consider changing the order of operations to first write the state variables and then perform the external calls to other contracts for readability and consistency purposes, and to be safe against reentrancy attacks even if the called functions change.

Update: Not fixed. Holdefi’s statement for this issue:

We know that. We followed Checks-Effects-Interactions pattern in the whole code. But in this case, indexes should be updated with previous values, not new values.

In these cases, we still suggest to follow the defensive Checks-Effects-Interactions when calling other contracts. Consider saving the old values into local variables, and pass those when calling the external contracts. In the meanwhile, consider explaining in the code the reason of not follow the Checks-Effects-Interactions pattern.

[N04] Inconsistent coding style

Deviations from the Solidity Style Guide were identified throughout the entire codebase. 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.

[N05] Floating Solidity compiler versions

It is a good practice to prevent that undiscovered vulnerabilities in newer compilers are not added to the project at the time of compiling the source code.

Nevertheless, the Holdefi project is using a floating pragma version that could include these new vulnerabilities when the project is compiled.

Consider fixing all the dependencies to the same stable Solidity version.

[N06] Named return variables

There is an inconsistent use of named return variables across the entire codebase. Some examples can be found in the getAccountCollateral function from the Holdefi contract or in the getCollateral function of the HoldefiSettings contract.

Consider removing all named return variables, explicitly declaring them as local variables in the body of the function, and adding the necessary explicit return statements where appropriate. This should favor both explicitness and readability of the project.

[N07] Timestamp may not be reliable

The Holdefi’s codebase uses the block.timestamp as part of the calculations and time checks.

Nevertheless, timestamps can be slightly altered by miners to favor them in contracts that have logics that depend strongly on them.

Consider taking into account this issue and warning the users that such scenario could happen. If the alteration of timestamps cannot affect the protocol in any way, consider documenting the reasoning and writing tests enforcing that these guarantees will be preserved even if the code changes in the future.

Update: Not fixed. Holdefi’s statement for this issue:

As you can see in the below link, If the scale of your time-dependent event can vary by 15 seconds and maintain integrity, it is safe to use a block.timestamp. Using block.timestamp for generating random numbers is not good in the lottery or this kind of context. But in our platform 10-15 seconds in 1 year doesn’t change anything and miner can’t make a profit. https://consensys.github.io/smart-contract-best-practices/recommendations/#timestamp-dependence

We have updated our suggestion to make it clearer.

[N08] Unnecessary imports

In the Holdefi contract, consider removing the import statement for the Ownable contract as it is never used.

[N09] Unused events

Line 124 of Holdefi.sol declares a RepayBorrow event. As it is never emitted, consider removing the declaration or emitting the event in the appropriate place.

[N10] Misleading comments

On Holdefi.sol:
Line 160: Should say ‘Deposit ERC20 assets as supply’
Line 184: The withdrawSupply not only handles tokens, but also ETH
Line 592: The getAccountSupply function also returns the currentSupplyIndex variable
Line 607: The getAccountBorrow function also returns the currentBorrowIndex variable

On CollateralsWallet.sol:
Line 19: The withrdaw function not only handles tokens, but also ETH

Consider updating the comments to more accurately describe the purpose and effect of the codebase.

[N11] Misleading function and variable names

To favor explicitness and readability, some functions and variables from the whole repository may benefit from a better naming.
Our suggestions are:

In the HoldefiPauser contract:
isPause to isPaused
newOwnerChanger to ownerChanger
functionsNum to pauseOperationsLength
newPaused to functionsToPause
newUnpaused to functionsToUnpause

In the HoldefiSettings contract:
secondsPerTenDays to periodBetweenUpdates
getMarket to isMarketActive
newOwnerChanger to ownerChanger
– All occurrencies where penaltyRate is part of a variable the name, to liquidationRatio
Market to MarketSettings, to differentiate it from the Market struct defined in the Holdefi contract

In the Holdefi contract:
– All ocurrencies of totalBalance to totalBorrowedBalance

[N12] TODOs in code

On line 11 and line 38 of HoldefiPrices.sol, there are “TODO” comments that should be removed and instead tracked in the project’s issues backlog.

[N13] Typos in comments

Throughout the Holdefi’s codebase, there are a few typos in the code and in comments. We list them here.

  • On line 8 of CollateralsWallet.sol, ‘collateralls’ should be ‘collaterals’
  • On line 33 and on line 39 of HoldefiPauser.sol, ‘functions’ should be ‘function’
  • On line 27 of Ownable.sol, ‘can not’ should be ‘cannot’
  • On line 16 of HoldefiSettings.sol, ‘All these settings is callable by only owner’ should say ‘All these settings are callable only by the owner’


No critical and 3 high severity issues were found. Some changes were proposed to follow best practices and reduce potential attack surface.