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Dinari

Audit name:

[SCA] Dinari | Adapter Token | Dec2024

Date:

Dec 30, 2024

Table of Content

→Introduction
→Audit Summary
→System Overview
→Potential Risks
→Findings
→Appendix 1. Definitions
→Appendix 2. Scope
→Appendix 3. Additional Valuables
→Disclaimer

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Introduction

We express our gratitude to the Dinari team for the collaborative engagement that enabled the execution of this Smart Contract Security Assessment.

Dinari Securities Backed Tokens (dShares) provide direct exposure to the world's most trusted assets such as Google and Apple shares.

Document

NameSmart Contract Code Review and Security Analysis Report for Dinari
Audited ByStepan Chekhovskoi
Approved ByPrzemyslaw Swiatowiec
Websitehttps://dinari.com→
Changelog12/12/2024 - Preliminary Report
30/12/2024 - Second Report
PlatformPlume
LanguageSolidity
TagsVault, DeFi
Methodologyhttps://hackenio.cc/sc_methodology→

  • Document

    Name
    Smart Contract Code Review and Security Analysis Report for Dinari
    Audited By
    Stepan Chekhovskoi
    Approved By
    Przemyslaw Swiatowiec
    Website
    https://dinari.com→
    Changelog
    12/12/2024 - Preliminary Report
    30/12/2024 - Second Report
    Platform
    Plume
    Language
    Solidity
    Tags
    Vault, DeFi
    Methodology
    https://hackenio.cc/sc_methodology→

Review Scope

Repositoryhttps://github.com/dinaricrypto/sbt-contracts→
Initial Commit1fa1a298373cefc252694984640db62d8f3a6b33
Second Commitd327ea9a6fc5f86caf73769dd1983b5333e774b8

Audit Summary

3Total Findings
2Resolved
1Accepted
0Mitigated

The system users should acknowledge all the risks summed up in the risks section of the report

Documentation quality

  • Functional Requirements are partially missed.

  • Technical Description is provided.

Code quality

  • The code architecture is clean and easy to read.

  • The development environment is configured.

  • While the NatSpec comments mention OrderProcessor provides price with 18 decimals, the calculations imply 36 - dShare.decimals().

  • The OracleLib functionality does not revert transaction in case of overflow and returns zero.

Test coverage

Code coverage of the project is 74% (branch coverage).

  • Deployment and basic user interactions are covered with tests.

  • Negative cases coverage is partially missed.

System Overview

DinariAdapterToken is a vault contract developed to use ETF dShare as one of liquid assets in Plume Nest money market.

The vault is built on top of out-of-scope ComponentToken contract - ERC-4626 Vault with ERC-7540 and ERC-7575 extensions.

The contract integrates external OrderProcessor used to exchange vault asset token to dShare and back.

Implemented functionality:

  • convertToShares, convertToAssets - ComponentToken overrides provide info on the vault rate based on conversion rate from OrderProcessor,

  • requestDeposit, requestRedeem - asynchronous vault deposit and redeem processing funds through the OrderProcessor,

  • processSubmittedOrders, processNextSubmittedOrder - functions to validate if the OrderProcessor have executed the submitted requests.

Privileged roles

  • The system is designed to work exclusively with Nest Staking.

  • The system owner can upgrade the contract.

Potential Risks

System Reliance on External Contracts: The functioning of the system significantly relies on Order Processor and Nest Staking external contracts. Any flaws or vulnerabilities in these contracts adversely affect the audited project, potentially leading to security breaches or loss of funds.

Dependency on External Logic for Implemented Logic: The DinariAdapterToken logic highly depends on ComponentToken external contract not covered by the audit. This reliance introduces risks if these external contracts are compromised or contain vulnerabilities, affecting the audited project's integrity.

Dynamic Array Iteration Gas Limit Risks: The processSubmittedOrders iterates over large dynamic arrays, which leads to excessive Gas costs, risking denial of service due to out-of-gas errors, alternative processNextSubmittedOrder function can be used to process requests one-by-one.

Single Points of Failure and Control: The project is mostly centralized, introducing single points of failure and control. This centralization can lead to vulnerabilities in decision-making and operational processes, making the system more susceptible to targeted attacks or manipulation.

Flexibility and Risk in Contract Upgrades: The project's contracts are upgradeable, allowing the administrator to update the contract logic at any time. While this provides flexibility in addressing issues and evolving the project, it also introduces risks if upgrade processes are not properly managed or secured, potentially allowing for unauthorized changes that could compromise the project's integrity and security.

Token Decimals Reliance: The system relies on the dShare token has 18 decimals. Missing the invariant may cause inconsistencies in price decimals calculation leading to the price interpreted incorrectly breaking the conversion rate.

Zero Output in Case of Overflow: The system returns zero shares in exchange for assets or zero assets in exchange for shares in case overflow happens in internal price calculations. Consider simulate transaction before executing to avoid the edge cases.

Findings

Code
―
Title
Status
Severity
F-2024-7639Possibly Invalid Swap Rate due to Using Unreliable Market Price
accepted

Medium
F-2024-7626Floating Pragma
fixed

Observation
F-2024-7625Public Functions that Can be External
fixed

Observation
1-3 of 3 findings

Identify vulnerabilities in your smart contracts.

Appendix 1. Definitions

Severities

When auditing smart contracts, Hacken is using a risk-based approach that considers Likelihood, Impact, Exploitability and Complexity metrics to evaluate findings and score severities.

Reference on how risk scoring is done is available through the repository in our Github organization:

Severity

Description

Critical
Critical vulnerabilities are usually straightforward to exploit and can lead to the loss of user funds or contract state manipulation.

High
High vulnerabilities are usually harder to exploit, requiring specific conditions, or have a more limited scope, but can still lead to the loss of user funds or contract state manipulation.

Medium
Medium vulnerabilities are usually limited to state manipulations and, in most cases, cannot lead to asset loss. Contradictions and requirements violations. Major deviations from best practices are also in this category.

Low
Major deviations from best practices or major Gas inefficiency. These issues will not have a significant impact on code execution.

  • Severity

    Critical

    Description

    Critical vulnerabilities are usually straightforward to exploit and can lead to the loss of user funds or contract state manipulation.

    Severity

    High

    Description

    High vulnerabilities are usually harder to exploit, requiring specific conditions, or have a more limited scope, but can still lead to the loss of user funds or contract state manipulation.

    Severity

    Medium

    Description

    Medium vulnerabilities are usually limited to state manipulations and, in most cases, cannot lead to asset loss. Contradictions and requirements violations. Major deviations from best practices are also in this category.

    Severity

    Low

    Description

    Major deviations from best practices or major Gas inefficiency. These issues will not have a significant impact on code execution.

Potential Risks

The "Potential Risks" section identifies issues that are not direct security vulnerabilities but could still affect the project’s performance, reliability, or user trust. These risks arise from design choices, architectural decisions, or operational practices that, while not immediately exploitable, may lead to problems under certain conditions. Additionally, potential risks can impact the quality of the audit itself, as they may involve external factors or components beyond the scope of the audit, leading to incomplete assessments or oversight of key areas. This section aims to provide a broader perspective on factors that could affect the project's long-term security, functionality, and the comprehensiveness of the audit findings.

Appendix 2. Scope

The scope of the project includes the following smart contracts from the provided repository:

Scope Details

Repositoryhttps://github.com/dinaricrypto/sbt-contracts→
Initial Commit1fa1a298373cefc252694984640db62d8f3a6b33
Second Commitd327ea9a6fc5f86caf73769dd1983b5333e774b8
Whitepaperhttps://assets.dinari.com/forms/dinari-whitepaper.pdf→
RequirementsNotes shared internally
Technical RequirementsREADME.md

Assets in Scope

DinariAdapterToken.sol - DinariAdapterToken.sol

Appendix 3. Additional Valuables

Additional Recommendations

The smart contracts in the scope of this audit could benefit from the introduction of automatic emergency actions for critical activities, such as unauthorized operations like ownership changes or proxy upgrades, as well as unexpected fund manipulations, including large withdrawals or minting events. Adding such mechanisms would enable the protocol to react automatically to unusual activity, ensuring that the contract remains secure and functions as intended.

To improve functionality, these emergency actions could be designed to trigger under specific conditions, such as:

  • Detecting changes to ownership or critical permissions.

  • Monitoring large or unexpected transactions and minting events.

  • Pausing operations when irregularities are identified.

These enhancements would provide an added layer of security, making the contract more robust and better equipped to handle unexpected situations while maintaining smooth operations.

Disclaimer