LEEQUID - Staking

1 Executive Summary

This report presents the results of our engagement with LEEQUID to review their liquid staking solution.

The review was conducted over two weeks, from September 4, 2023 to September 19th, by Rai Yang and Chingiz Mardanov. A total of 20 person-days were spent.

LEEQUID is a protocol targeting the LUKSO chain and the corresponding LYX token, aiming to to become the goto liquid staking solution of the ecosystem.

Most contracts that were part of this engagement were modified from the StakeWise V2 repository that can be found here. Primary modifications from the StakeWise contracts are reward withdrawal mechanisms that is enabled on the LUKSO chain. An unstake mechanism (validator exiting) as well as unstake/stake order matching component for efficient unstaking are also added to the protocol.

2 Scope

Our review focused on the commit hash c7348f2c421b0c8d4bfacf746bfbb882e18cce13. The list of files in scope can be found in the Appendix.

2.1 Objectives

Together with the LEEQUID team, we identified the following priorities for our review:

1. Correctness of the implementation, consistent with the intended functionality and without unintended edge cases.
2. Identify known vulnerabilities particular to smart contract systems, as outlined in our Smart Contract Best Practices, and the Smart Contract Weakness Classification Registry.

3 System Overview

• Pool - Main entrypoint contract through which all of the staking is initiated.

• StakedLyxToken - Token that represents the users share of the staked LYX token. This token is non-rebasing and the un-staking process is also initiated via this contract by creating and UnstakeRequest. The matching logic between the new deposits and the previously created UnstakeRequests also happens in this contract.

• Rewards - Contract responsible for the distributing and accumulating the rewards generated by the staking operations.

4 Recommendations

5 Security Specification

This section describes, from a security perspective, the expected behavior of the system under audit. It is not a substitute for documentation. The purpose of this section is to identify specific security properties that were validated by the audit team.

5.1 Actors

The relevant actors are listed below with their respective abilities:

• User - User stakes LYX and earns rewards from liquidity staking and validator rewards in sLYX as well as unstakes sLYX

• Oracle - Off-chain component that monitors and tracks the state of the beacon chain.

• Orchestrator - Off-chain component that collects oracle’s votes and publishes the reward data, registers new and updates the state of the activated and exited validators as well as manages un-stake operations through exiting validators.

• Operator - account that is allowed to add new validators to the system, currently only one operator, the Leequid team.

• Admin - account that is allowed to upgrade the contracts as well as onboard new operators.

5.2 Trust Model

In any system, it’s important to identify what trust is expected/required between various actors. For this audit, we established the following trust assumptions:

• Oracles track onchain data correctly and timely
• Orchestrator performs reward publishing, validator registration, validator state updating correctly and timely
• Admin manages operator, oracle and orchestrator and performs contract upgrade correctly

6 Findings

Each issue has an assigned severity:

• Minor issues are subjective in nature. They are typically suggestions around best practices or readability. Code maintainers should use their own judgment as to whether to address such issues.
• Medium issues are objective in nature but are not security vulnerabilities. These should be addressed unless there is a clear reason not to.
• Major issues are security vulnerabilities that may not be directly exploitable or may require certain conditions in order to be exploited. All major issues should be addressed.
• Critical issues are directly exploitable security vulnerabilities that need to be fixed.

contract Rewards is IRewards, OwnablePausableUpgradeable, ReentrancyGuardUpgradeable {

contract Pool is IPool, OwnablePausableUpgradeable, ReentrancyGuardUpgradeable {

contract StakedLyxToken is OwnablePausableUpgradeable, LSP4DigitalAssetMetadataInitAbstract, IStakedLyxToken, ReentrancyGuardUpgradeable {

Pool
PoolValidators
FeeEscrow
Reward
StakeLyxTokem
Oracles 
MerkleDistributor

function receiveFees() external payable override {}

function receiveWithoutActivation() external payable override {
    require(msg.sender == address(stakedLyxToken) || hasRole(DEFAULT_ADMIN_ROLE, msg.sender), "Pool: access denied");
}

if (unstakeAmount > totalPendingUnstake) {
    pool.receiveWithoutActivation{value: unstakeAmount - totalPendingUnstake}();
    unstakeAmount = totalPendingUnstake;
}

totalPendingUnstake -= unstakeAmount;
totalUnstaked += unstakeAmount;
uint256 amountToFill = unstakeAmount;

for (uint256 i = unstakeRequestCurrentIndex; i <= unstakeRequestCount; i++) {
    UnstakeRequest storage request = _unstakeRequests[i];
    if (amountToFill > (request.amount - request.amountFilled)) {
        amountToFill -= (request.amount - request.amountFilled);
        continue;
    } else {
        if (amountToFill == (request.amount - request.amountFilled) && i < unstakeRequestCount) {
            unstakeRequestCurrentIndex = i + 1;
        } else {
            request.amountFilled += uint128(amountToFill);
            unstakeRequestCurrentIndex = i;
        }
        break;
    }
}

if (unstakeAmount > totalPendingUnstake) {
            pool.receiveWithoutActivation{value: unstakeAmount - totalPendingUnstake}();
            unstakeAmount = totalPendingUnstake;
            totalPendingUnstake = 0;
            unstakeRequestCurrentIndex = unstakeRequestCount;
            _unstakeRequests[unstakeRequestCount].amountFilled = _unstakeRequests[unstakeRequestCount].amount;
 } 

function initialize(
    address _admin,
    address _stakedLyxToken,
    address _rewards,
    address _validators,
    address _oracles,
    bytes32 _withdrawalCredentials,
    address _validatorRegistration,
    uint256 _minActivatingDeposit,
    uint256 _pendingValidatorsLimit
) public initializer {
    require(_stakedLyxToken != address(0), "Pool: stakedLyxToken address cannot be zero");
    require(_rewards != address(0), "Pool: rewards address cannot be zero");
    require(_admin != address(0), "Pool: admin address cannot be zero");
    require(_oracles != address(0), "Pool: oracles address cannot be zero");
    require(_validatorRegistration != address(0), "Pool: validatorRegistration address cannot be zero");
    require(_validators != address(0), "Pool: validators address cannot be zero");
    require(_withdrawalCredentials != bytes32(0), "Pool: withdrawalCredentials cannot be zero");

Appendix 1 - Files in Scope

This audit covered the following files:

Appendix 2 - Disclosure

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