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Venus Token Converter Audit

Table of Contents


From 2023-09-11
To 2023-09-20
Total Issues
20 (19 resolved)
Critical Severity Issues
0 (0 resolved)
High Severity Issues
0 (0 resolved)
Medium Severity Issues
2 (2 resolved)
Low Severity Issues
8 (7 resolved)
Notes & Additional Information
10 (10 resolved)


We audited the VenusProtocol/protocol-reserve repository at commit ca8f8ba.

In scope were the following contracts:

├── ProtocolReserve
│   ├── RiskFundStorage.sol
│   ├── RiskFundV2.sol
│   └── XVSVaultTreasury.sol
├── TokenConverter
│   ├── AbstractTokenConverter.sol
│   ├── IAbstractTokenConverter.sol
│   ├── RiskFundConverter.sol
│   └── XVSVaultConverter.sol
└── Utils
    ├── Constants.sol
    └── Validators.sol

System Overview

The Venus protocol collects revenues from reserve interest and liquidations. The revenues are generated from the core lending pool as well as various isolated pools, and initially sent to the protocol share reserve contract. The function of the protocol share reserve is then to distribute these revenues to different targets, keeping track of which pools they were collected from.

Within the scope of this audit, these targets will include the RiskFundConverter and XVSVaultConverter contracts. These contracts are responsible for converting the received tokens into a specific single token type before sending them to different locations. The RiskFundConverter converts tokens to USDT before sending to the RiskFundV2 contract and the XVSVaultConverter converts tokens to XVS before sending to the XVSVaultTreasury.

These conversions are meant to be performed in a distributed and efficient manner, and thus Venus will incentivize these conversions to be performed by offering discounts. By allowing external agents to provide USDT and XVS to the converter contracts to be swapped at a rate provided by the Venus ResilientOracle with a discount, users can benefit from the favorable swap rate which provides an arbitrage opportunity. Venus benefits by not being exposed to slippage and sandwich attacks if the conversions were to happen on an external AMM due to potentially large trade sizes.

Token Converter Contracts

The AbstractTokenConverter is an abstract contract which acts as a base for both the RiskFundConverter and XVSVaultConverter. Extending Venus' AccessControlV8 contract, it integrates with the AccessControlManager (ACM, out of scope) with permissioned functions handled by a governance timelock and it includes an owner for more critical operations.

Authorized users can set convertConfigurations which are unique for each tokenAddressIn, tokenAddressOut pair, setting an incentive for conversions of the pair. The incentive can be at most 50% as enforced by the MAX_INCENTIVE constant value. Conversion configurations are supported for any tokens, including fee-on-transfer types, for which the Venus ResilientOracle has a price. This provides flexibility, but does not allow the XVSTokenConverter and RiskFundConverter to strictly enforce a single tokenAddressIn as XVS or USDT, respectively.

The oracle address is set during initialization and can be changed by the owner thereafter. During conversions, no price validation is performed on the retrieved prices, and it is assumed that the oracle is not corrupted or malicious. The current implementation of the ResilientOracle collects prices from various sources to be robust and will cause a revert if any returned price is 0.

Security Model and Trust Assumptions

We trust that the Protocol Share Reserve handles all accounting and token distribution functions correctly. We trust the Resilient Oracle to provide reliable prices.

Privileged Roles

Those authorized in the ACM can perform the following privileged actions:

  • Pause and resume conversions
  • Set conversion configurations for any token pair
  • Send funds from the XVSVaultTreasury to the XVSVault
  • Configure direct transfers for pool/asset types in the RiskFundConverter (tokens get sent directly to risk fund with no conversion)

The owner can perform the following privileged actions:

  • Set the address of the price oracle
  • Set the destination address of converted funds
  • Sweep (transfer out) any amount of arbitrary tokens from the converter contracts
  • Set the convertibleBaseAsset, riskFundConverter, and shortfall addresses in RiskFundV2
  • Sweep any of the tracked assets from RiskFundV2
  • Set the XVSVault address in XVSVaultTreasury

Medium Severity

Fee-On-Transfer Tokens Lead to Improper Tracking

Untracked assets residing in RiskFundConverter can be tracked using the updateAssetsState function. If the asset is configured to be transferred directly to the destination (i.e., the RiskFundV2 vault), the poolAssetsFunds in RiskFundV2 will be updated using the updatePoolState call. However, if this asset is a fee-on-transfer token, the balance will not be properly tracked as the amount of funds sent from the RiskFundConverter will not be the same as the amount of funds received by the RiskFundV2. This could lead off-chain scripts designed to transfer funds from RiskFundV2 to fail due to insufficient balances if they are reading from poolAssetsFunds. Consider tracking the actual amount of funds received by RiskFundV2 instead of the amount of funds sent from RiskFundConverter to support fee-on-transfer tokens.

Update: Resolved at commit 4025db0.

ERC-777 Tokens Lead to Improper Tracking

RiskFundConverter and XVSVaultConverter are offering the income generated by the Venus protocol to external agents for either USDT or XVS. Upon swapping the assets, the agent can call, for example, the convertExactTokens function which transfers USDT or XVS from the agent to the converter contract and sends the tokens to the agent. By subtracting the token balance before the transfer by the token balance after the transfer, the converter contract knows how many tokens were sent out in order to update the internal state in the postConversionHook function.

If the token is an ERC-777 and the external agent has registered a receive hook, it will be able to execute arbitrary code during the transfer. During this arbitrary code execution, the agent is able to influence the token balance by either transferring out tokens or acquiring additional tokens (e.g., by interacting with a DEX or lending protocol). By performing this action, the agent is able to inflate or deflate the calculation of the amount of funds which were sent out of the converter contract.

As this value is used to keep track of the number of assets held by the converter, the agent is able to create a discrepancy between the amount of tokens that the converter is tracking and the one it is actually holding. In case the converter is tracking fewer tokens than it actually holds, the balances can easily be synced using the updateAssetsState function. However, in case the converter is tracking more tokens than it actually holds, honest external agents' swaps will result in a revert as the converter does not hold enough tokens to perform a swap.

Consider tracking the amount of tokens which were sent out of the converter by subtracting the token balance of the converter instead of the token balance of the external agent.

Update: Resolved at commit 939da0a.

Low Severity

Inconsistent Convention for Checking Access Allowance

_checkAccessAllowed is called using the function signature (e.g., here and here), but it is called using a different convention in XVSVaultTreasury (variable name replaces type). Consider sticking to a consistent convention for _checkAccessAllowed to avoid the likelihood of checking for incorrect strings and causing functions to revert.

Update: Resolved at commit b467b46.

Inconsistent Zero-Address Checks

In the RiskFundConverter contract, there are some inconsistencies in how zero addresses are checked. For example:

  • Three addresses are passed to the constructor but only the first is checked with ensureNonzeroAddress. vBNB and NATIVE_WRAPPED are never checked throughout the contract. Consider checking that all arguments are non-zero.
  • Throughout the contract, zero addresses are checked using a mix of ensureNonzeroAddress and != address(0). Consider adopting a consistent convention.
  • In updateAssetsState, poolRegistry is checked to be non-zero, but this seems unnecessary. It is not an argument to the function and is always checked when set. Consider removing the check in updateAssetsState, but adding it in the initializer.

Update: Resolved at commit 0f58716.

Owner Can Only Sweep Tracked Assets From Risk Fund

The risk fund's sweep function only allows the owner to transfer funds that have been deposited by the risk fund converter and tracked in the internal state. There is no functionality to sweep tokens that have been mistakenly sent to the contract, as exists in the token converter.

Consider adding arbitrary token sweeps to the risk fund to prevent donated tokens from becoming irrecoverable.

Update: Resolved at commit a842667.

Missing Docstrings

Throughout the codebase, there are several parts that do not have docstrings. For instance:

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

Update: Resolved at commit a555053.

Missing Event Emissions

Consider adding event emissions in the previously described cases to ensure that off-chain monitoring can properly track these occurrences.

Update: Resolved at commit 35dc0a1.

Missing Check of XVS Store Address

In the XVSVaultTreasury contract, the xvsStore address is obtained from the xvsVault before tokens are transferred to the xvsStore. However, there is no check that the address is non-zero.

Consider verifying the xvsStore address before sending tokens to it.

Update: Resolved at commit e558b15.

Sweeping Tokens in Risk Fund Should Be Protected by Access Control Manager

According to the onlyOwner vs. AccessControlManager (ACM) rule, more critical changes (i.e., relationships between contracts) should be protected with onlyOwner as this is protected by the normal timelock (24 hours of voting + 48 hours of delay). The ACM should be used for actions which should potentially bypass voting, enabling them to take the fast-track or critical route, or even to be executed directly through a multisig by guardians.

The sweepToken function in RiskFundV2 sweeps tokens from the RiskFund vault to the owner. As this functionality is not a critical change in the protocol but only moves assets, it could benefit from the shorter fast-track or critical VIPs in certain cases. For example, if bad debt needs to be covered quickly in case of heavy market fluctuations.

Consider restricting access to the ACM instead of the onlyOwner modifier in this case.

Update: Acknowledged, not resolved. The Venus team stated:

After a discussion with the team, we came to the conclusion of using OnlyOwner for the sweepToken.

Lack of Storage Gap

The upgradeable XVSVaultConverter contract does not have a storage gap configured. Storage gaps are a convention for reserving storage slots in a base contract, allowing future versions of that contract to use up those slots without affecting the storage layout of the child contract.

Consider adding a storage gap variable to avoid future storage clashes in upgradeable contracts.

Update: Resolved at commit 2be108d.

Notes & Additional Information

Incorrect Comments

Throughout the codebase, there are instances of misleading comments or comments with typographical errors. For example:

In AbstractTokenConverter.sol:

  • line 240: "fater" should be "after"
  • line 344: says public function, but has the onlyOwner modifier
  • line 474: "liquity" should be "liquidity"
  • line 143 and line 624: these functions set the destination address, not the oracle

In RiskFundConverter.sol:

  • line 224: "poolAssetsResreves" should be "poolAssetsReserves"
  • line 180: "transfromation" should be "transformation"

Consider correcting these comments to improve the overall clarity of the codebase.

Update: Resolved at commit 5d0f03b.

Unnecessary Storage Usage in Conversion Configuration

The convertConfigurations mapping stores ConversionConfig structs for each tokenAddressIn, tokenAddressOut pair to keep track of incentives and check if those pairs are enabled. Since tokenAddressIn, tokenAddressOut are already used as keys in the mapping, and since ConversionConfig is not used anywhere else in the codebase, it is unnecessary to store the token addresses in the struct as well. Consider removing the token address fields from the ConversionConfig struct to avoid unnecessary storage usage and gas costs. Since the token addresses are only read from a struct in setConversionConfig, this would be the only function that would require refactoring after making this change.

Update: Resolved at commit 91eb7a6.

postSweepToken Should Revert Early on Insufficient Balance

postSweepToken in the RiskFundConverter contract is executed before residual tokens are transferred out. If the amount to sweep is greater than the balance in the contract, the function will thus revert after postSweepToken, which loops through the internal reserve accounting logic. A revert with division by zero can also occur in this case if attempting to sweep a token with 0 assetReserves. It is possible to catch both these cases early in postSweepToken without executing unnecessary logic.

Consider reverting early in postSweepToken to handle these cases and ensure more clearly defined error handling and gas efficiency.

Update: Resolved at commit 1e367e1.

Incorrect Error in getAmountIn

To get the amount of tokenAddressIn tokens a user should send to receive amountOutMantissa tokens of tokenAddressOut, users can call the getAmountIn function of AbstractTokenConverter. If the supplied amountOutMantissa is 0, the function reverts with an InsufficientInputAmount error, while semantically it should be an InsufficientOutputAmount error.

Consider correcting the error to accurately describe the situation.

Update: Resolved at commit 8d6389c.

Unused State Variables

Throughout the codebase, there are multiple unused state variables:

To improve the overall clarity, intentionality, and readability of the codebase, consider removing any unused state variables. In case the unused state variable is necessary to prevent storage collisions between different versions of a contract (e.g., maxLoopsLimit, pancakeSwapRouter and minAmountToConvert), consider changing the name of the variable to clarify that the variable is deprecated.

Update: Resolved. The Venus team stated:

The state variables maxLoopsLimit, pancakeSwapRouter, and minAmountToConvert already have explanations in their Natspec that they are deprecated. Regarding the BLOCKS_PER_YEAR state variable, it might have utility in the future. Importantly, it hasn't been imported in any file, ensuring that it does not impact the bytecode as of now.

Unused Named Return Variables

Named return variables are a way to declare variables that are meant to be used within a function's body for the purpose of being returned as the function's output. They are an alternative to explicit in-line return statements.

There is an instance of an unused named return variable, which is the tokenBalance return variable in the balanceOf function in RiskFundConverter.sol.

Consider either using or removing any unused named return variables.

Update: Resolved at commit 8227f4b.

Lack of Security Contact

Providing a specific security contact (such as an email or ENS name) within a smart contract significantly simplifies the process for individuals to communicate if they identify a vulnerability in the code. This practice proves beneficial as it permits the code owners to dictate the communication channel for vulnerability disclosures, eliminating the risk of miscommunication or failure to report due to a lack of knowledge on how to do so. Additionally, if the contract incorporates third-party libraries and a bug surfaces in these, it becomes easier for the maintainers of those libraries to make contact with the appropriate person about the problem and provide mitigation instructions.

Throughout the codebase, there are contracts that do not have a security contact:

Consider adding a NatSpec comment containing a security contact on top of the contracts' definition. Using the @custom:security-contact convention is recommended as it has been adopted by the OpenZeppelin Wizard and the ethereum-lists.

Update: Resolved at commit 08bacb3.

Constants Not Using UPPER_CASE Format

Throughout the codebase there are constants not using UPPER_CASE format. For instance:

According to the Solidity Style Guide, constants should be named with all capital letters with underscores separating words. For better readability, consider following this convention.

Update: Resolved at commit bda9bea.

The Function _disableinitializers() Is Not Being Called in the Constructors of Multiple Initializable Contracts

An implementation contract in a proxy pattern allows anyone to call its initialize function. While not a direct security concern, preventing the implementation contract from being initialized is important, as this could allow an attacker to take over the contract. This would not affect the proxy contract's functionality, as only the implementation contract's storage would be affected.

Throughout the codebase, there are multiple initializable contracts where _disableInitializers() is not called in the constructor. For instance:

Consider calling _disableInitializers() in initializable contract constructors to prevent malicious users from tampering with implementation storage.

Update: Resolved at commit 78150be.

Lack of Indexed Event Parameters

Within AbstractTokenConverter.sol, several events do not have their parameters indexed. For instance:

Consider indexing event parameters to improve the ability of off-chain services to search for and filter for specific events.

Update: Resolved at commit 3876d3b.


The Token Converter scope is well-implemented, with only 2 issues of medium severity and several issues of low or note severity. All in all, the codebase is in a good state. However, we present several recommendations on how to improve the maturity of the codebase.