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AI AUDIT RESULTS

SUMMARY OF POTENTIAL VULNERABILITIES

1. Lack of Input Validation for Contract Initialization
2. Inaccuracy in Floating-Point Swap Calculations
3. Insecure Admin Authorization Practices
4. Insufficient Role-Based Access Control
5. Risks from Dependency on External Data/Contracts
6. Vulnerable to Unchecked State Modifications
7. Insufficient Initialization Validation for Critical Parameters
8. Missing Events for Key Admin and Configuration Changes
9. Inadequate Validation in Contract Instantiation and Configuration Updates
10. Missing Slippage Protection in Swap Operations
11. Lack of Update Mechanism for Dependency Data/Contracts

DETAILED AI AUDIT FINDINGS

Vulnerability 1: Insufficient Input Validation

The InstantiateMsg struct allows setting initial configuration without validation checks for terms like admin address or fee recipient. In particular, setting a fee recipient to an inappropriate address or the swap contract address itself without further checks could lead to unexpected behavior or loss of funds.

Mitigation: Implement thorough validation for all configuration parameters on instantiation and updates. Ensure admin addresses are valid blockchain addresses, and perform checks on fee recipient settings to prevent setting to addresses that could lead to unexpected behavior.

Vulnerability #2: Floating Point Arithmetic

The contract performs arithmetic operations on floating-point numbers (represented by FPDecimal), especially in swap calculations. This is a problem because floating-point arithmetic is not precise due to binary representation, which could lead to rounding errors or inaccuracies in swap rates, potentially exploited for financial gain.

Mitigation: Avoid floating-point arithmetic for financial calculations. Utilize integer math or, if necessary, a fixed-point arithmetic library that handles decimal operations with explicit rounding rules to ensure precision.

Vulnerability InjectiveLabs#3: Admin Authorization Checks

The contract frequently relies on the verify_sender_is_admin function to check if the message sender is authorized to perform certain operations. However, there's a potential risk if the admin address is compromised or not securely managed.

Mitigation: Implement multi-signature requirements for critical admin functions or introduce a more decentralized governance model to reduce reliance on a single admin address. Additionally, consider time locks or operation delays for sensitive actions to provide a window for detection and response to unauthorized actions.

Vulnerability InjectiveLabs#4. Permissions and Roles:

- While the code does include checks to ensure that only admins can perform certain operations (such as `verify_sender_is_admin` in `admin.rs`), a more robust role-based access control (RBAC) mechanism could further enhance security. This would allow for finer-grained permissions, reducing the risk associated with a single admin account.
- **Mitigation**: Implement more granular role-based access control mechanisms for operations that require different levels of permissions. This approach could help mitigate risks associated with over-privileged accounts.

Vulnerability InjectiveLabs#5. Dependency on External Data/Contracts:

- The contract seems to rely on external data, such as market information and order execution results. This dependency introduces risks such as incorrect data feeds, manipulation of the external contracts, or the unavailability of these contracts.
- **Mitigation**: Implement validation checks, timeouts, and fallback mechanisms for handling external data or interactions. Consider using decentralized oracles for data feeds to reduce reliance on a single source.

Vulnerability InjectiveLabs#6. Unchecked State Modifications:

- In functions like `execute_swap_step` and `handle_atomic_order_reply` in `swap.rs`, state modifications are made possibly based on external inputs or data (e.g., market orders). If these inputs are incorrect or manipulated, they might corrupt the contract state.
- **Mitigation**: Add thorough validation of all external inputs and interim checks before committing state changes. Implement mechanisms to revert state changes in case of failures.

Vulnerability InjectiveLabs#7: Inadequate Initialization Checks

The instantiate function initializes the contract with an admin and a fee recipient. However, there's insufficient validation around these critical parameters. Malformed or unintended addresses could be set as the admin or fee recipient, potentially compromising contract governance or resulting in the misdirection of fees.

Mitigation:

• Implement comprehensive validation for all inputs to the instantiate function. This includes checking that addresses are not empty, conform to expected formats, and potentially that they represent existing entities on the chain if applicable.

// Example validation snippet in `instantiate`
if msg.admin.is_empty() || !msg.admin.as_str().starts_with("cosmos...") {
    return Err(ContractError::InvalidAdminAddress {});
}

Vulnerability InjectiveLabs#8: Lack of Events for Critical State Changes

While the contract does emit certain events, the code snippets provided do not systematically emit events for all critical state changes, specifically around admin and configuration updates. This can obscure the transparency of contract governance actions and complicate audit trails for actions performed by the admin.

Mitigation:

• Ensure that every critical state change, especially those initiated by admin actions like update_config, emits a corresponding event. This improves transparency and enables better monitoring and historical analysis of contract operations.

// Add event emission in admin action functions
Ok(Response::new()
    .add_attribute("action", "admin_changed")
    .add_attribute("new_admin", admin.to_string()))

Vulnerability InjectiveLabs#9: Insufficient Check on InstantiateMsg and Config Validation

Location:

• In InstantiateMsg struct within msg.rs
• In Config struct and its associated validate method within types.rs

Problem:

The Config struct's validate method is defined but essentially empty, performing no actual validation on config data such as the fee_recipient and admin fields during contract instantiation or updates. Similarly, the instantiation message does not enforce any checks beyond structurally conforming to the InstantiateMsg. This oversight introduces a risk where an improperly initialized contract could proceed to operation without critical configurations properly set or validated.

Impact:

Improperly validated initialization parameters might lead to scenarios where administrative functions are locked out or fees are misrouted due to incorrectly set addresses, potentially causing financial loss or locked funds.

Recommendation:

Implement thorough validation logic inside the Config::validate method, ensuring that both the admin and fee_recipient fields are non-empty, valid blockchain addresses, and perform similar checks upon receiving InstantiateMsg.

Vulnerability InjectiveLabs#10: Lack of Slippage Protection in Swap Execution

Location:

• Function execute_swap_step in swap.rs

Problem:

The contract performs swap operations without explicit slippage checks or limits, relying solely on the worst_price as a safeguard. Without a predefined maximum slippage parameter that users can set, they are potentially exposed to significant price movements between the initiation of a swap and its execution on volatile markets.

Impact:

Users may receive significantly less output than expected if market prices move unfavorably after a swap is triggered but before it's executed, leading to potential financial loss without explicit protection mechanisms in place.

Recommendation:

Introduce a slippage tolerance parameter in swap-related messages that users can specify. Modify the swap execution logic to calculate and enforce this slippage tolerance, potentially reverting the transaction if the calculated slippage exceeds the user's specified limit.

Vulnerability InjectiveLabs#11: Lack of Update Mechanism for Dependency Data/Contracts

Description:

The code does not explicitly mention mechanisms for updating or managing dependencies on external data sources or contracts, such as price feeds or liquidity pool contracts, which might change or become deprecated over time.

Potential Impact:

Relying on outdated or compromised external contracts could lead to incorrect calculation of swap amounts or make the system vulnerable to exploits if those external dependencies are attacked.

Suggested Mitigation:

Implement a process for regular review and update of external data sources or contracts. Ensure that contracts consuming external data are capable of updating the addresses of these data sources or have fallback options in case of compromised sources.