buy and sell will revert when a low decimal ERC20 token is used as baseToken

[code423n4]

Lines of code

https://github.com/code-423n4/2022-12-caviar/blob/main/src/Pair.sol#L154
https://github.com/code-423n4/2022-12-caviar/blob/main/src/Pair.sol#L186
https://github.com/code-423n4/2022-12-caviar/blob/main/src/Pair.sol#L398-L400
https://github.com/code-423n4/2022-12-caviar/blob/main/src/Pair.sol#L406-L409

Vulnerability details

Impact

When buying or selling fractional Tokens from pair, buyQuote and sellQuote is used to calculate how much base Token is needed in exchange of the amount of fractional Tokens user is buying or selling. In the event that a low decimal ERC20 token is used (USDC with 6 decimals), buyQuote and sellQuote will underflow and revert unless fractional tokens amount is big enough.

Proof of Concept

In buy, buyQuote is used to calculate the amount of input base Tokens for the amount of fractional tokens user wants to buy.

        inputAmount = buyQuote(outputAmount);

However, we can see that in buyQuote, fractionalTokenReserves (18 decimals) will be significantly bigger than baseTokenReserves if base Token has a small decimal count. i.e (USDC 6 decimals). buyQuote and sellQuote will underflow and revert due to baseTokenReserves divide by fractionalTokenReserves.

    function buyQuote(uint256 outputAmount) public view returns (uint256) {
        return (outputAmount * 1000 * baseTokenReserves()) / ((fractionalTokenReserves() - outputAmount) * 997);
    }

Tools Used

Manual Review

Recommended Mitigation Steps

There should be a minimum for outputAmount depending on the number of decimal the ERC20 used for base Token has.

require(outputAmount > 10 ** 18- ERC20(baseToken).decimals, "outputAmount needs to be more )

Or if possible, ONE can be based on base token decimals.

[c4-judge]

berndartmueller marked the issue as duplicate of #243

[c4-judge]

berndartmueller marked the issue as satisfactory