Lodestar Finance Collateral Price Manipulation - Revision history

Azoundria: Another 30 minutes complete.

2023-06-20T05:50:40Z

Another 30 minutes complete.

← Older revision		Revision as of 23:50, 19 June 2023
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	{{~~Imported~~ Case Study~~\|source=https://www.quadrigainitiative.com/casestudy/lodestarfinancecollateralpricemanipulation.php~~}}[[File:Lodestarfinance.jpg\|thumb\|Lodestar Finance]]Lodestar Finance is a decentralized borrowing and lending protocol designed for the Arbitrum community. The platform allows users to earn interest on their assets by supplying them to the protocol and collateralizing their deposits. The protocol is based on Compound and has made modifications to support Arbitrum, DPX, MAGIC, and plvGLP. It relies on Chainlink Oracles for accurate pricing, except for plvGLP. Recently, Lodestar fell victim to an attack where an attacker manipulated the plvGLP price reported by the GLPOracle contract, resulting in the draining of the lending pools and a profit of approximately $6.5 million. The incident caused a significant drop in the token price and total value locked (TVL). ~~As of now, no~~ plans for reparations have been announced.		{{Case Study Under Construction}}[[File:Lodestarfinance.jpg\|thumb\|Lodestar Finance]]Lodestar Finance is a decentralized borrowing and lending protocol designed for the Arbitrum community. The platform allows users to earn interest on their assets by supplying them to the protocol and collateralizing their deposits. The protocol is based on Compound and has made modifications to support Arbitrum, DPX, MAGIC, and plvGLP. It relies on Chainlink Oracles for accurate pricing, except for plvGLP. Recently, Lodestar fell victim to an attack where an attacker manipulated the plvGLP price reported by the GLPOracle contract, resulting in the draining of the lending pools and extracting a profit of approximately $6.5 million. The incident caused a significant drop in the token price and total value locked (TVL). No plans for reparations have been announced.

	== About Lodestar Finance ==		== About Lodestar Finance ==
	Lodestar Finance is an algorithmic borrowing and lending protocol focused on decentralized money markets in Arbitrum communities. It aims to provide decentralized lending services to emerging communities like Treasure, Dopex, and Plutus, benefiting token holders and DAOs. The platform allows users to earn interest by supplying assets like MAGIC, DPX, and plvGLP to the protocol and collateralizing their deposits. It enables borrowing of crypto assets, access to liquidity without triggering taxable events, and leveraged trading strategies. Lodestar plans to partner with more communities as the Arbitrum ecosystem evolves, aiming to support layer 2 native communities that lack access to critical DeFi infrastructure. One of its collateral assets is plvGLP, which represents locked GLP from Plutus DAO. Built as a Compound fork, Lodestar has added code to support changes, including Arbitrum integration, support for DPX, MAGIC, and plvGLP, modifications to interest models, and other adjustments<ref name="lodestarfinance-10911" /><ref name="lodestarfinancedocs-10912" />.		Lodestar Finance is an algorithmic borrowing and lending protocol focused on decentralized money markets in Arbitrum communities. It aims to provide decentralized lending services to emerging communities like Treasure, Dopex, and Plutus, benefiting token holders and DAOs. The platform allows users to earn interest by supplying assets like MAGIC, DPX, and plvGLP to the protocol and collateralizing their deposits. It enables borrowing of crypto assets, access to liquidity without triggering taxable events, and leveraged trading strategies. Lodestar plans to partner with more communities as the Arbitrum ecosystem evolves, aiming to support layer 2 native communities that lack access to critical DeFi infrastructure. One of its collateral assets is plvGLP, which represents locked GLP from Plutus DAO. Built as a Compound fork, Lodestar has added code to support changes, including Arbitrum integration, support for DPX, MAGIC, and plvGLP, modifications to interest models, and other adjustments<ref name="lodestarfinance-10911" /><ref name="lodestarfinancedocs-10912" />.

	~~=== Bug Bounty And Crowd Audit ===~~
	Lodestar Finance reportedly held a crowd audit and bug bounty competition<ref name="lodestarfinancedocs-10906" />.<blockquote>To further bolster our security measures, we have implemented a crowd audit and bug bounty competition in partnership with Hats Finance (<nowiki>https://hats.finance/</nowiki>). This program invited security researchers and white-hat hackers to review our code and identify any potential vulnerabilities to earn bounties.

	~~No critical bug putting funds at risk was reported, while 18 medium improvements were reported and 2 gas optimisations</blockquote>~~

	== The Reality ==		== The Reality ==
	~~"The Lodestar docs state that:"~~		There were some interesting warning signs which would have been visible prior to the exploit.
	~~"we are relying on Chainlink Oracles for accurate pricing (with the exception of plvGLP)"~~

	~~"Manipulating the price of collateral has~~ been a popular attack technique since the beginning of DeFi, but especially in recent times, as this incident follows the attacks on both Mango and Moola Markets, who lost $115M, and $8.4M respectively, in October."

	~~"343 ETH ($430k) necessary for the attack was bridged from Polygon three months ago."~~

	~~This sections is included if a case involved deception or information that was unknown at~~ the ~~time~~. ~~Examples include:~~

	* When the service was actually started (if different than the "~~official story~~").		=== History of Price Manipulation Attacks ===
	* Who actually ran a ~~service and their own personal history.~~		As Rekt explains in their description, price manipulation is not a new technique<ref name="rektnews-10904" />.<blockquote>"Manipulating the price of collateral has been a popular attack technique since the beginning of DeFi, but especially in recent times, as this incident follows the attacks on both Mango and Moola Markets, who lost $115M, and $8.4M respectively, in October."</blockquote>
	* How the ~~service was structured behind~~ the ~~scenes~~. ~~(For example~~, ~~there was no "trading bot~~".)
	* Details of what audits reported and how vulnerabilities were missed during auditing.

	=== Security Disclaimer ===		=== Security Disclaimer ===
	The Lodestar Finance team provides a disclaimer on their Security page, ~~however it is not clear if this~~ was ~~added before or after~~ the ~~exploit occurred~~<ref name=":0">[https://web.archive.org/web/20230203041406/https://docs.lodestarfinance.io/documentation/security Security - Lodestar Finance Docs Archive February 2nd, 2023 9:14:06 PM MST] (May 24, 2023)</ref>.<blockquote>Caution should be exercised when interacting with any smart contract or blockchain application. There is always risk of vulnerabilities in smart contract code, and while the codebase we launching with is incredibly battle-tested and we are relying on Chainlink Oracles for accurate pricing (with the exception of plvGLP), there are still always risks.		The Lodestar Finance team provides a disclaimer on their Security page<ref name=":0">[https://web.archive.org/web/20230203041406/https://docs.lodestarfinance.io/documentation/security Security - Lodestar Finance Docs Archive February 2nd, 2023 9:14:06 PM MST] (May 24, 2023)</ref>, which was present at the time of the attack<ref name="rektnews-10904" />. The disclaimer specifically makes mention of the use of Chainlink, except for the plvGLP asset<ref name=":0">[https://web.archive.org/web/20230203041406/https://docs.lodestarfinance.io/documentation/security Security - Lodestar Finance Docs Archive February 2nd, 2023 9:14:06 PM MST] (May 24, 2023)</ref>, which could be interpreted as an invitation for an attacker to look for a potential vulnerability<ref name="rektnews-10904" />.<blockquote>Caution should be exercised when interacting with any smart contract or blockchain application. There is always risk of vulnerabilities in smart contract code, and while the codebase we launching with is incredibly battle-tested and we are relying on Chainlink Oracles for accurate pricing (with the exception of plvGLP), there are still always risks.

	We have attempted to mitigate them through extensive unit and integration testing, leaning on the community for beta testing, along with ongoing bug bounties, but there is still always going to be an inherent smart contract risk and market risks while using the protocol.</blockquote>		We have attempted to mitigate them through extensive unit and integration testing, leaning on the community for beta testing, along with ongoing bug bounties, but there is still always going to be an inherent smart contract risk and market risks while using the protocol.</blockquote>
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	\|List of Affected Users Published		\|List of Affected Users Published
	\|As part of the recovery plan, Lodestar publishes a list of affected users to their Twitter and requests others to ensure they are present on the list<ref name=":5">[https://twitter.com/LodestarFinance/status/1604192516303384576 Lodestar Finance - "If you were a victim of the Lodestar exploit, please make sure your address is present on this list" - Twitter] (Jun 5, 2023)</ref>.		\|As part of the recovery plan, Lodestar publishes a list of affected users to their Twitter and requests others to ensure they are present on the list<ref name=":5">[https://twitter.com/LodestarFinance/status/1604192516303384576 Lodestar Finance - "If you were a victim of the Lodestar exploit, please make sure your address is present on this list" - Twitter] (Jun 5, 2023)</ref>.
			\|-
			\|March 8th, 2023 5:03:21 PM MST
			\|Audit Competition Launched
			\|Lodestar Finance launches an audit competition<ref name=":6">[https://hatsfinance.medium.com/lodestar-finance-audit-competition-2bb3b44209a3 Lodestar Finance Audit Competition - Hats Finance Medium] (Jun 19, 2023)</ref>. "In this competition, participants from all over the world will be searching for vulnerabilities in the Lodestar Finance contract directory, with prizes awarded based on the severity of each vulnerability found."
			\|-
			\|March 22nd, 2023 12:00:00 PM MDT
			\|Crowd Audit Completed
			\|The audit was completed<ref name=":6" /> and reportedly "No critical bug putting funds at risk was reported, while 18 medium improvements were reported and 2 gas optimisations"<ref name="lodestarfinancedocs-10906" />.
	\|}		\|}

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	"Solidity Finance summarised the root cause: The GLPOracle did not properly take into account the impact of a user calling donate() on the GlpDepositor contract, which inflates the assets of the GlpDepositor contract, and therefore the oracle-delivered price of the plvGLP token."		"Solidity Finance summarised the root cause: The GLPOracle did not properly take into account the impact of a user calling donate() on the GlpDepositor contract, which inflates the assets of the GlpDepositor contract, and therefore the oracle-delivered price of the plvGLP token."

			"343 ETH ($430k) necessary for the attack was bridged from Polygon three months [prior to the attack]."<ref name="rektnews-10904" />

	=== Solidity Finance Technical Analysis ===		=== Solidity Finance Technical Analysis ===
	Solidity Finance ~~published~~ a technical analysis of the exploit<ref name=":1" /><ref name="solidityfinancetwitter-10907" />:<blockquote>@LodestarFinance has suffered an exploit as a result of an 8-figure flash loan attack.		Solidity Finance was one of the first to publish a technical analysis of the exploit<ref name=":1" /><ref name="solidityfinancetwitter-10907" />:<blockquote>@LodestarFinance has suffered an exploit as a result of an 8-figure flash loan attack.

	We have been investigating and discussing with them & the @PlutusDAO_io team, as Plutus was used in the exploit, but not exploited.		We have been investigating and discussing with them & the @PlutusDAO_io team, as Plutus was used in the exploit, but not exploited.
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	<ref name=":5" />		<ref name=":5" />
	=== Bug Bounty And Crowd Audit ===		=== Bug Bounty And Crowd Audit ===
	Lodestar Finance reportedly held a crowd audit and bug bounty competition<ref name="lodestarfinancedocs-10906" />~~. This was not present on their original security page~~<ref name=":0" />.<blockquote>To further bolster our security measures, we have implemented a crowd audit and bug bounty competition in partnership with Hats Finance (<nowiki>https://hats.finance/</nowiki>). This program invited security researchers and white-hat hackers to review our code and identify any potential vulnerabilities to earn bounties.		Lodestar Finance reportedly held a crowd audit and bug bounty competition<ref name="lodestarfinancedocs-10906" /> following the attack<ref name=":0" /><ref name=":6" />.<blockquote>To further bolster our security measures, we have implemented a crowd audit and bug bounty competition in partnership with Hats Finance (<nowiki>https://hats.finance/</nowiki>). This program invited security researchers and white-hat hackers to review our code and identify any potential vulnerabilities to earn bounties.

			In this competition, participants from all over the world will be searching for vulnerabilities in the Lodestar Finance contract directory, with prizes awarded based on the severity of each vulnerability found.

	No critical bug putting funds at risk was reported, while 18 medium improvements were reported and 2 gas optimisations</blockquote>~~There~~ is also ~~reports that the team is~~ considering a bug bounty through ImmuneFi<ref name="lodestarfinancedocs-10906" />.		No critical bug putting funds at risk was reported, while 18 medium improvements were reported and 2 gas optimisations</blockquote>The team is also reportedly considering launching a bug bounty program through ImmuneFi<ref name="lodestarfinancedocs-10906" />.

	=== Disclaimer Embellished ===		=== Disclaimer Embellished ===
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	=== Smart Contract Audit Obtained ===		=== Smart Contract Audit Obtained ===
	Following the attack, Lodestar Finance obtained an audit from Solidity Finance<ref>[https://solidity.finance/audits/LodestarFinance/ Lodestar Finance Audit - Solidity Finance] (May 24, 2023)</ref>.		Following the attack, Lodestar Finance obtained an audit from Solidity Finance<ref>[https://solidity.finance/audits/LodestarFinance/ Lodestar Finance Audit - Solidity Finance] (May 24, 2023)</ref>. This audit identified several findings and made corresponding recommendations. The findings include issues with the GLPOracle and SushiOracle contracts, which could lead to price manipulation and borrowing of excessive assets. The audit also highlighted informational findings related to the ComptrollerG7, ComptrollerNoGov, WhitePaperInterestRateModel, JumpRateModel, and JumpRateModelV2 contracts, suggesting improvements or updates. The contracts were reviewed for reentrancy attacks and found to be safe. The audit provides an overview of the contracts, including the Comp Contract, Unitroller Contract, Comptroller Contract, CToken Contract, WhitePaperInterestRateModel, JumpRateModel, JumpRateModelV2 contracts, GovernorAlpha Contract, and GovernorBravo Contract, explaining their functionalities and features. The audit report concludes that some issues have been resolved by the team, while others require further attention and implementation of the recommended changes.

	== Total Amount Recovered ==		== Total Amount Recovered ==

Azoundria: Another 30 minutes complete.

2023-06-05T17:30:28Z

Another 30 minutes complete.

← Older revision		Revision as of 11:30, 5 June 2023
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	\|-		\|-
	\|December 10th, 2022 2:14:00 PM MST		\|December 10th, 2022 2:14:00 PM MST
	\|Lodestar Finance ~~Report~~		\|Lodestar Finance Announcement
	\|Lodestar Finance reports on Twitter that they've set all interest rates to 0 while they weight options. They also provide some details on the exploit which occurred<ref name="lodestarfinancetwitter-10905" />.		\|Lodestar Finance reports on Twitter that they've set all interest rates to 0 while they weight options. They also provide some details on the exploit which occurred<ref name="lodestarfinancetwitter-10905" />.
			\|-
			\|December 10th, 2022 2:56:00 PM MST
			\|Lodestar Finance Message To Attacker
			\|Lodestar Finance posts a specific plea to the attacker on Twitter, requesting they "reach out" to "find a white-hack agreement" and offering to "generously reward" the "collaboration"<ref name=":2">[https://twitter.com/LodestarFinance/status/1601697374937939968 Lodestar Finance - "If you are the hacker, reach out to us so we can find a white-hat agreement and move on." - Twitter] (Jun 5, 2023)</ref>.
	\|-		\|-
	\|December 11th, 2022 1:24:00 AM MST		\|December 11th, 2022 1:24:00 AM MST
	\|CertiK Incident Report		\|CertiK Incident Report
	\|<ref name="certik-10908" /><ref>[https://twitter.com/CertiKAlert/status/1601855328366346242 CertiKAlert - "Lending platform @LodestarFinance was attacked resulting in a ~$6.5m profit for the exploiter. The team has set interest rates to 0 so that supply and borrow balances will not move." - Twitter] (May 5, 2023)</ref>. ~~TBD~~		\|CertiK posts an announcement on Twitter about the exploit "resulting in a ~$6.5m profit for the exploiter" and notes that "[t]he team has set interest rates to 0 so that supply and borrow balances will not move<ref name="certik-10908" /><ref name=":3">[https://twitter.com/CertiKAlert/status/1601855328366346242 CertiKAlert - "Lending platform @LodestarFinance was attacked resulting in a ~$6.5m profit for the exploiter. The team has set interest rates to 0 so that supply and borrow balances will not move." - Twitter] (May 5, 2023)</ref>".
			\|-
			\|December 11th, 2022 4:18:00 AM MST
			\|Post Mortem Summary
			\|The Lodestar Finance team shares a post-mortem summary of the exploit<ref>[https://twitter.com/LodestarFinance/status/1601899225821990915 Lodestar Finance - "We just published a summary Post-Mortem of yesterday's exploit" - Twitter] (Jun 5, 2023)</ref>. They mention that the attacker has "thus far not responded" to their requests to negotiate a bug bounty and they are proceeding with a recovery plan based on the 2,720,000 GLP from the plvGLP contract<ref name=":4">[https://blog.lodestarfinance.io/post-mortem-summary-13f5fe0bb336 Post Mortem Summary - Lodestar Finance] (Jun 5, 2023)</ref>.
	\|-		\|-
	\|December 12th, 2022		\|December 12th, 2022
	\|Rekt Publishes Article		\|Rekt Publishes Article
	\|Rekt publishes an article on the situation<ref name="rektnews-10904" />.		\|Rekt publishes an article on the situation<ref name="rektnews-10904" />.
			\|-
			\|December 17th, 2022 12:11:00 PM MST
			\|List of Affected Users Published
			\|As part of the recovery plan, Lodestar publishes a list of affected users to their Twitter and requests others to ensure they are present on the list<ref name=":5">[https://twitter.com/LodestarFinance/status/1604192516303384576 Lodestar Finance - "If you were a victim of the Lodestar exploit, please make sure your address is present on this list" - Twitter] (Jun 5, 2023)</ref>.
	\|}		\|}

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	6. 2.8 Million of the GLP is recoverable, which is worth about $2.4 million. We are going to reach out to the hacker and see if we can negotiate a bug bounty to recover more funds.		6. 2.8 Million of the GLP is recoverable, which is worth about $2.4 million. We are going to reach out to the hacker and see if we can negotiate a bug bounty to recover more funds.
	7. If you are the hacker, we will be reaching out to you on Debank at ~~these 3~~ addresses:</blockquote>
			7. If you are the hacker, we will be reaching out to you on Debank at [three addresses provided].</blockquote>They also provided some additional detail and summary in their post-mortem.<ref name=":4" /><blockquote>The TLDR of the exploit is that the attacker was able to manipulate the plvGLP oracle price by creating a large plvGLP collateral position using flash loans first, donating GLP to the plvGLP contract which caused an instantaneous change in the price, that was then compounded through their loops allowing them to borrow more than they should have been allowed. Because the price can change within the same block, it made this possible. The donation function is not unique to plvGLP and is possible with other standard vault contracts by depositing tokens. The oracle design needs to be completely rethought. Not accounting for the donated GLP would have prevented this but would have also resulted in inaccurate pricing as legitimately donated GLP actually underlies plvGLP. To prevent the exploit the oracle can’t be allowed to undergo instantaneous change within the same block.</blockquote>

			=== CertiK Report And Technical Analysis ===
			CertiK published a detailed analysis of the exploit on Twitter<ref name=":3" />.<blockquote>Lending platform @LodestarFinance was attacked resulting in a ~$6.5m profit for the exploiter. The team has set interest rates to 0 so that supply and borrow balances will not move.

			The hacker manipulated the exchange rate of plvGLP token to 1.83 GLP per plvGLP. The attacker used the inflated assets as collateral on @LodestarFinance to remove all available liquidity via bad debt.

			The hacker burned ~3m GLP, resulting in a profit of ~$6.5M which was bridged to Ethereum and distributed to 3 EOAs.

			@LodestarFinance announced that they may be able to recover an 2.8M GLP (~$2.4M) of the stolen funds.

			Lodestar has made an announcement directed at the hacker, in an attempt to make a white-hat agreement. At this time, the exploiter has not answered Lodestar's negotiation efforts.</blockquote>

	== Total Amount Lost ==		== Total Amount Lost ==
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	"Following the exploit, the funds were swapped to ETH, bridged back to mainnet and dispersed to multiple addresses."		"Following the exploit, the funds were swapped to ETH, bridged back to mainnet and dispersed to multiple addresses."

			=== Lodestar Finance Initial Actions/Announcement ===
			Lodestar Finance updated interest rates to 0 to prevent balances from moving. They then posted an announcement to their community on Twitter<ref name="lodestarfinancetwitter-10905" /><ref name=":3" /> with a technical analysis of the exploit and plans to reach out to the attacker. This was followed up with a more specific Tweet to the attacker<ref name=":2" />.<blockquote>If you are the hacker, reach out to us so we can find a white-hat agreement and move on. Recovering the funds of our users is the main priority and we will generously reward your collaboration.</blockquote>

	=== Twitter Reactions ===		=== Twitter Reactions ===
	The events were used to discredit blockchain in general<ref>[https://twitter.com/JasonCDaniels/status/1601711058317475840 Jason C Daniels - "If you play with criminals, you get crimed. It should have been abundantly clear 10 years ago that crypto is a haven for criminals. Cut your losses. Get out of that business, find something else..." - Twitter] (May 24, 2023)</ref>.<blockquote>If you play with criminals, you get crimed. It should have been abundantly clear 10 years ago that crypto is a haven for criminals. Cut your losses. Get out of that business, find something else... like tulips. At least if they go bust you'll still have the flowers.</blockquote>		The events were used to discredit blockchain in general<ref>[https://twitter.com/JasonCDaniels/status/1601711058317475840 Jason C Daniels - "If you play with criminals, you get crimed. It should have been abundantly clear 10 years ago that crypto is a haven for criminals. Cut your losses. Get out of that business, find something else..." - Twitter] (May 24, 2023)</ref>.<blockquote>If you play with criminals, you get crimed. It should have been abundantly clear 10 years ago that crypto is a haven for criminals. Cut your losses. Get out of that business, find something else... like tulips. At least if they go bust you'll still have the flowers.</blockquote>Others mentioned that they believed the attacker should cooperate<ref>[https://twitter.com/AustinB95811150/status/1601703280530567168 Austin Brown - "These hackers often get caught, sometimes years later, once they try to convert stolen crypto into cash. Much easier and safer for the hacker to return funds and still profit, without having to worry about hiding for the rest of their life." - Twitter] (Jun 5, 2023)</ref>.<blockquote>These hackers often get caught, sometimes years later, once they try to convert stolen crypto into cash. Much easier and safer for the hacker to return funds and still profit, without having to worry about hiding for the rest of their life.</blockquote>And one tried to get interest in decentralized insurance<ref>[https://twitter.com/unoreinsure/status/1601711456718057472 Uno Re - "We are sorry for the unfortunate incident and hope you will be able to recover your funds with minimal loss. Please consider decentralized insurance as an alternative in the future." - Twitter] (Jun 5, 2023)</ref>.<blockquote>We are sorry for the unfortunate incident and hope you will be able to recover your funds with minimal loss. Please consider decentralized insurance as an alternative in the future.</blockquote>

	== Ultimate Outcome ==		== Ultimate Outcome ==
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	"two days have now passed since the initial attack on Lodestar, and no mention of any planned reparations has yet been made."		"two days have now passed since the initial attack on Lodestar, and no mention of any planned reparations has yet been made."

			=== Victim List Published December 17th ===
			<ref name=":5" />
	=== Bug Bounty And Crowd Audit ===		=== Bug Bounty And Crowd Audit ===
	Lodestar Finance reportedly held a crowd audit and bug bounty competition<ref name="lodestarfinancedocs-10906" />. This was not present on their original security page<ref name=":0" />.<blockquote>To further bolster our security measures, we have implemented a crowd audit and bug bounty competition in partnership with Hats Finance (<nowiki>https://hats.finance/</nowiki>). This program invited security researchers and white-hat hackers to review our code and identify any potential vulnerabilities to earn bounties.		Lodestar Finance reportedly held a crowd audit and bug bounty competition<ref name="lodestarfinancedocs-10906" />. This was not present on their original security page<ref name=":0" />.<blockquote>To further bolster our security measures, we have implemented a crowd audit and bug bounty competition in partnership with Hats Finance (<nowiki>https://hats.finance/</nowiki>). This program invited security researchers and white-hat hackers to review our code and identify any potential vulnerabilities to earn bounties.
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	=== Smart Contract Audit Obtained ===		=== Smart Contract Audit Obtained ===
	Lodestar Finance ~~ultimately~~ obtained an audit from Solidity Finance<ref>[https://solidity.finance/audits/LodestarFinance/ Lodestar Finance Audit - Solidity Finance] (May 24, 2023)</ref>.		Following the attack, Lodestar Finance obtained an audit from Solidity Finance<ref>[https://solidity.finance/audits/LodestarFinance/ Lodestar Finance Audit - Solidity Finance] (May 24, 2023)</ref>.

	== Total Amount Recovered ==		== Total Amount Recovered ==

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Azoundria: Created page with "{{Imported Case Study|source=https://www.quadrigainitiative.com/casestudy/lodestarfinancecollateralpricemanipulation.php}} {{Unattributed Sources}} Lodestar FinanceLodestar Finance is a decentralized borrowing and lending protocol designed for the Arbitrum community. The platform allows users to earn interest on their assets by supplying them to the protocol and collateralizing their deposits. The protocol is based on Compound and has..."

2023-05-05T22:58:09Z

Created page with "{{Imported Case Study|source=https://www.quadrigainitiative.com/casestudy/lodestarfinancecollateralpricemanipulation.php}} {{Unattributed Sources}} thumb|Lodestar FinanceLodestar Finance is a decentralized borrowing and lending protocol designed for the Arbitrum community. The platform allows users to earn interest on their assets by supplying them to the protocol and collateralizing their deposits. The protocol is based on Compound and has..."

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{{Imported Case Study|source=https://www.quadrigainitiative.com/casestudy/lodestarfinancecollateralpricemanipulation.php}}
{{Unattributed Sources}}

[[File:Lodestarfinance.jpg|thumb|Lodestar Finance]]Lodestar Finance is a decentralized borrowing and lending protocol designed for the Arbitrum community. The platform allows users to earn interest on their assets by supplying them to the protocol and collateralizing their deposits. The protocol is based on Compound and has made modifications to support Arbitrum, DPX, MAGIC, and plvGLP. It relies on Chainlink Oracles for accurate pricing, except for plvGLP. Recently, Lodestar fell victim to an attack where an attacker manipulated the plvGLP price reported by the GLPOracle contract, resulting in the draining of the lending pools and a profit of approximately $6.5 million. The incident caused a significant drop in the token price and total value locked (TVL). As of now, no plans for reparations have been announced.

This is a global/international case not involving a specific country.<ref name="rektnews-10904" /><ref name="lodestarfinancetwitter-10905" /><ref name="lodestarfinancedocs-10906" /><ref name="solidityfinancetwitter-10907" /><ref name="certik-10908" /><ref name="arbiscan-10909" /><ref name="arbiscan-10910" /><ref name="lodestarfinance-10911" /><ref name="lodestarfinancedocs-10912" />

== About Lodestar Finance ==
"Lodestar Finance is an algorithmic borrowing and lending protocol that is aiming to bring the critical DeFi primitive of decentralized money markets to Arbitrum communities." "Lodestar brings the critical DeFi primitive of decentralized money markets to Arbitrum cryptocurrencies like MAGIC, DPX, and plvGLP."

"The mission of Lodestar Finance is to bring decentralized lending services to blossoming Arbitrum communities like Treasure, Dopex, and Plutus to create new value for token holders and DAOs."

"Earn interest on Arbitrum assets like MAGIC, DPX, and plvGLP by supplying them to the protocol. Collateralize your deposit, which enables the ability to borrow crypto assets. Access liquidity without creating a taxable event. Employ leveraged trading strategies (long and short positions) by utilizing the borrowing functionalities of the protocol. Unlock the liquidity of yield bearing assets such as plvGLP without sacrificing the underlying yield."

"As the Arbitrum ecosystem continues to develop, we will be on the lookout for more communities to partner with and create value for layer 2 native communities that lack access to critical DeFi infrastructure."

"Among Lodestar’s collateral assets is the yield-bearing plvGLP, representing GLP locked in Plutus DAO’s vault."

"Lodestar is a Compound fork at the core, and Compound has some of the most battle-tested contracts in all of DeFi. We have added code to support a few changes we have made, namely adding Arbitrum support, DPX, MAGIC and plvGLP support, tweaking some Interest Models, and a few other small changes."

"The Lodestar docs state that:"
"we are relying on Chainlink Oracles for accurate pricing (with the exception of plvGLP)"

"Manipulating the price of collateral has been a popular attack technique since the beginning of DeFi, but especially in recent times, as this incident follows the attacks on both Mango and Moola Markets, who lost $115M, and $8.4M respectively, in October."

"343 ETH ($430k) necessary for the attack was bridged from Polygon three months ago."

"Using flash loans, the attacker manipulated the plvGLP price reported by Lodestar’s GLPOracle contract, allowing them to “borrow” all the funds supplied on the platform." "[T]he attacker [drained] their lending pools for a profit of ~$6.5M."

"Solidity Finance summarised the root cause: The GLPOracle did not properly take into account the impact of a user calling donate() on the GlpDepositor contract, which inflates the assets of the GlpDepositor contract, and therefore the oracle-delivered price of the plvGLP token."

"The incident saw the token LODE dump by ~70% and TVL drop to just $11."

"Following the exploit, the funds were swapped to ETH, bridged back to mainnet and dispersed to multiple addresses."

"two days have now passed since the initial attack on Lodestar, and no mention of any planned reparations has yet been made."

This is a global/international case not involving a specific country.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

* Known history of when and how the service was started.
* What problems does the company or service claim to solve?
* What marketing materials were used by the firm or business?
* Audits performed, and excerpts that may have been included.
* Business registration documents shown (fake or legitimate).
* How were people recruited to participate?
* Public warnings and announcements prior to the event.

Don't Include:
* Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
* Anything that wasn't reasonably knowable at the time of the event.
There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

== The Reality ==
This sections is included if a case involved deception or information that was unknown at the time. Examples include:

* When the service was actually started (if different than the "official story").
* Who actually ran a service and their own personal history.
* How the service was structured behind the scenes. (For example, there was no "trading bot".)
* Details of what audits reported and how vulnerabilities were missed during auditing.

== What Happened ==
The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.
{| class="wikitable"
|+Key Event Timeline - Lodestar Finance Collateral Price Manipulation
!Date
!Event
!Description
|-
|May 5th, 2023 4:42:58 PM MDT
|First Event
|Describe the event.
|}

== Technical Details ==
This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?

== Total Amount Lost ==
The total amount lost has been estimated at $6,500,000 USD.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

== Immediate Reactions ==
How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

== Ultimate Outcome ==
What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

== Total Amount Recovered ==
There do not appear to have been any funds recovered in this case.

What funds were recovered? What funds were reimbursed for those affected users?

== Ongoing Developments ==
What parts of this case are still remaining to be concluded?
== Individual Prevention Policies ==
{{Prevention:Individuals:Placeholder}}

{{Prevention:Individuals:End}}

== Platform Prevention Policies ==
{{Prevention:Platforms:Placeholder}}

{{Prevention:Platforms:End}}

== Regulatory Prevention Policies ==
{{Prevention:Regulators:Placeholder}}

{{Prevention:Regulators:End}}

== References ==
<references><ref name="rektnews-10904">[https://rekt.news/lodestar-rekt/ Rekt - Lodestar Finance - REKT] (May 5, 2023)</ref>

<ref name="lodestarfinancetwitter-10905">[https://twitter.com/lodestarfinance/status/1601686921566375936 @lodestarfinance Twitter] (May 5, 2023)</ref>

<ref name="lodestarfinancedocs-10906">[https://docs.lodestarfinance.io/documentation/security Security - Docs] (May 5, 2023)</ref>

<ref name="solidityfinancetwitter-10907">[https://twitter.com/SolidityFinance/status/1601684153740963840 @SolidityFinance Twitter] (May 5, 2023)</ref>

<ref name="certik-10908">[https://www.certik.com/resources/blog/TqTyq4vYHl8JzS7zyJye9-lodestar-finance-incident-analysis Lodestar Finance Incident Analysis - Blog - Web3 Security Leaderboard] (May 5, 2023)</ref>

<ref name="arbiscan-10909">[https://arbiscan.io/address/0xc29d94386ff784006ff8461c170d1953cc9e2b5c Lodestar Exploiter | Address 0xc29d94386ff784006ff8461c170d1953cc9e2b5c | Arbiscan] (May 5, 2023)</ref>

<ref name="arbiscan-10910">[https://arbiscan.io/tx/0xc523c6307b025ebd9aef155ba792d1ba18d5d83f97c7a846f267d3d9a3004e8c Arbitrum Transaction Hash (Txhash) Details | Arbiscan] (May 5, 2023)</ref>

<ref name="lodestarfinance-10911">[https://www.lodestarfinance.io/ Lodestar Finance] (May 5, 2023)</ref>

<ref name="lodestarfinancedocs-10912">[https://docs.lodestarfinance.io/ Lodestar Finance - Docs] (May 5, 2023)</ref></references>