lending-protocol-patterns

# Lending Protocol Patterns This skill provides comprehensive knowledge for auditing DeFi lending protocols. ## Core Lending Concepts | Concept | Description | |---------|-------------| | Collateral Factor | Max borrow % against collateral | | Liquidation Threshold | Health level triggering liquidation | | Utilization Rate | Borrowed / Total Supplied | | Interest Rate | Function of utilization | | Health Factor | Collateral value / Debt value | --- ## Liquidation Vulnerabilities ### 1. Profitable Self-Liquidation **Vulnerable Pattern:** ```solidity // DANGEROUS: Liquidator bonus too high uint256 constant LIQUIDATION_BONUS = 15e16; // 15% function liquidate(address user, uint256 repayAmount) external { // Attacker can: // 1. Borrow at 80% LTV // 2. Wait for tiny price drop // 3. Self-liquidate with 15% bonus // = Free 15% - (100% - 80%) = Net profit! } ``` **Check:** Liquidation bonus should be less than (100% - Max LTV). ### 2. Liquidation Cascade ```solidity // When one liquidation triggers another // Large position liquidated → price drops → more liquidations // Mitigations: // - Gradual liquidation (partial) // - Circuit breakers // - Liquidation delays ``` ### 3. Bad Debt Accumulation **Vulnerable Pattern:** ```solidity // DANGEROUS: No bad debt handling function liquidate(address user) external { // If collateral < debt after liquidation // Bad debt remains in protocol // Eventually becomes insolvent } // SECURE: Handle underwater positions function liquidate(address user) external { uint256 collateralValue = getCollateralValue(user); uint256 debtValue = getDebtValue(user); if (collateralValue < debtValue) { // Socialize bad debt or use insurance fund uint256 badDebt = debtValue - collateralValue; insuranceFund -= min(badDebt, insuranceFund); } } ``` --- ## Interest Rate Model ### Standard Jump Rate Model ```solidity contract JumpRateModel { uint256 public baseRate; // Rate at 0% utilization uint256 public multiplier; // Rate increase per utilization uint256 public jumpMultiplier; // Rate increase above kink uint256 public kink; // Utilization % where jump occurs function getBorrowRate(uint256 cash, uint256 borrows) public view returns (uint256) { uint256 utilization = borrows * 1e18 / (cash + borrows); if (utilization <= kink) { return baseRate + utilization * multiplier / 1e18; } else { uint256 normalRate = baseRate + kink * multiplier / 1e18; uint256 excessUtil = utilization - kink; return normalRate + excessUtil * jumpMultiplier / 1e18; } } } ``` ### Interest Rate Vulnerabilities **1. Rate Manipulation** ```solidity // Attacker can manipulate utilization // 1. Flash loan large amount // 2. Deposit → lower utilization → lower rates // 3. Borrow at low rate // 4. Withdraw and repay flash loan ``` **2. Precision Loss** ```solidity // DANGEROUS: Interest rounds to 0 for small amounts uint256 interest = principal * rate / SECONDS_PER_YEAR; // If principal * rate < SECONDS_PER_YEAR, interest = 0 // SOLUTION: Accumulate interest with high precision uint256 interestAccumulator; // Ray (1e27) precision ``` --- ## Collateral Vulnerabilities ### 1. Collateral Factor Changes ```solidity // DANGEROUS: Instant collateral factor reduction function setCollateralFactor(address token, uint256 newFactor) external { collateralFactors[token] = newFactor; // Existing borrowers may become instantly liquidatable! } // SECURE: Grace period or gradual reduction function setCollateralFactor(address token, uint256 newFactor) external { require(newFactor >= collateralFactors[token] - MAX_DECREASE); pendingFactors[token] = newFactor; factorEffectiveTime[token] = block.timestamp + TIMELOCK; } ``` ### 2. Collateral Oracle Manipulation ```solidity // Collateral valued using manipulable oracle // Attacker inflates collateral value → borrows more → profits // See oracle vulnerability patterns ``` ### 3. Toxic Collateral ```solidity // Collateral that can't be liquidated: // - Pausable tokens // - Blacklistable tokens // - Low liquidity tokens // Mitigation: Whitelist collateral carefully ``` --- ## Borrowing Vulnerabilities ### 1. Borrow Cap Bypass ```solidity // VULNERABLE: Cap checked only on new borrows function borrow(uint256 amount) external { require(totalBorrowed + amount <= borrowCap); // Interest accrual can push over cap! } // Check on any state-changing operation ``` ### 2. Same-Block Borrow-Repay ```solidity // EXPLOIT: Borrow and repay in same block // No interest accrued = free leverage function borrow(uint256 amount) external { require(lastBorrowBlock[msg.sender] < block.number); lastBorrowBlock[msg.sender] = block.number; // ... } ``` --- ## Health Factor Calculations ### Standard Formula ``` Health Factor = (Collateral Value × LTV) / Debt Value Health Factor > 1: Safe Health Factor < 1: Liquidatable ``` ### Vulnerabilities **1. Stale Health Factor** ```solidity // DANGEROUS: Cached health factor mapping(address => uint256) public healthFactors; // Health factors become stale as prices change // Always compute in real-time ``` **2. Rounding Direction** ```solidity // SECURE: Round health factor DOWN (safer) uint256 healthFactor = collateralValue * 1e18 / debtValue; // Round debt UP when calculating uint256 debt = (borrowed * (1e18 + interest) + 1e18 - 1) / 1e18; ``` --- ## Common AAVE/Compound Patterns ### Reserve Factor ```solidity // Protocol takes cut of interest uint256 interestToProtocol = interest * reserveFactor / 1e18; uint256 interestToSuppliers = interest - interestToProtocol; ``` ### Supply Index ```solidity // Track earnings per token // supplyIndex increases as interest accrues uint256 newIndex = oldIndex + (interest * 1e18 / totalSupply); // User earnings = balance * (currentIndex - userIndex) / 1e18 ``` --- ## Lending Audit Checklist ### Liquidation - [ ] Liquidation bonus < (100% - max LTV) - [ ] Bad debt handling exists - [ ] Partial liquidation supported - [ ] Liquidation can't be blocked (pausable tokens) - [ ] Self-liquidation not profitable ### Interest - [ ] Interest accrues correctly over time - [ ] No precision loss on small amounts - [ ] Rate manipulation resistance - [ ] Compound interest handled ### Collateral - [ ] Oracle is manipulation-resistant - [ ] Collateral factor changes have timelock - [ ] Collateral whitelist is reasonable - [ ] Handles rebasing/weird tokens properly ### Health Factor - [ ] Computed in real-time - [ ] Rounding favors protocol safety - [ ] Handles all edge cases (0 debt, 0 collateral) ### Access Control - [ ] Only authorized can change parameters - [ ] Emergency pause exists - [ ] Parameter bounds enforced ## Severity Classification ### Critical - Self-liquidation profitable - Bad debt not handled - Oracle manipulation allows draining ### High - Interest precision loss - Collateral factor instant changes - Same-block manipulation ### Medium - Missing borrow caps - Liquidation can be blocked - Rate model edge cases