Kirkeelee - Wrong accounting in case of using stETH as RA due to 1-2 Wei loss per transfer.

[sherlock-admin3]

Kirkeelee

Medium

Wrong accounting in case of using stETH as RA due to 1-2 Wei loss per transfer.

Summary

Protocol intends to allow usage of stETH as a pegged asset or even as a redemption asset per the litepaper but doesn't consider edge case in it's transfer mechanism which would lead to discrepancy between the accounting balance and the actual token balance.

Vulnerability Detail

There is a known issue with stETH that the actual transferred amount can be 1-2 Wei less due to rounding in balance calculations.
This will cause issues in accounting of the current protocol if stETH used as a redemption asset(RA).
All the RA deposits into the PSM are kept in the locked variable and the amount assigned to this variable is taken directly from the amount that the user calls with. The actual amount transferred will be 1-2 Wei less due to above issue.
Therefore the locked variable will be assigned more amount than the actual contract balance which will lead to issues when redeeming or converting to free etc. Negative or positive rebasing of stETH will also influence contract balance which will lead to additional issue.

Impact

Potential dos due to the wrong assumption of holdings.

Code Snippet

https://github.com/sherlock-audit/2024-08-cork-protocol/blob/main/Depeg-swap/contracts/libraries/RedemptionAssetManagerLib.sol#L32-L35

https://github.com/sherlock-audit/2024-08-cork-protocol/blob/main/Depeg-swap/contracts/libraries/PsmLib.sol#L84-L108

Tool used

Manual Review

Recommendation

Balance checks before and after transfers can be done but it will complicate the flow. Therefore it is better to not use stETH as RA and instead use wstETH.

Duplicate of #235