MakerDao Auction Lack of Validation

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MakerDAO

The MakerDAO auction platform had a vulnerability which would have allowed an attacker to create a fake bid without spending DAI, thereby effectively stealing the assets in question.

The vulnerability was discovered and resolved before it was exploited.

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

About MakerDAO

"The Maker Protocol, also known as the Multi-Collateral Dai (MCD) system, allows users to generate Dai by leveraging collateral assets approved by “Maker Governance.” Maker Governance is the community organized and operated process of managing the various aspects of the Maker Protocol. Dai is a decentralized, unbiased, collateral-backed cryptocurrency soft-pegged to the US Dollar. Resistant to hyperinflation due to its low volatility, Dai offers economic freedom and opportunity to anyone, anywhere."

"The flip contract allows for the MCD system to auction collateral in exchange for DAI. A lack of validation in the method flip.kick allows an attacker to create an auction with a fake bid value. Since the end contract trusts that value, it can be exploited to issue any amount of free DAI during liquidation. That DAI can then be immediately used to obtain all collateral stored in the end contract."

"The flipper contract (flip.sol) is intended to offer a way for the MCD contracts to obtain DAI by auctioning gems. An auction is initiated by calling the flip.kick method, which is normally done by the cat contract when it grabs collateral from a CDP. The implementation of that method, however, completely lacks access control and has very little validation -- in particular, it's possible to execute the method even during the liquidation phase."

"On top of that, all values stored in the auction are accepted as parameters of the method, including the bid amount. By directly calling the method, a malicious user can create a "fake" auction, with an arbitrary initial bid value, without spending the corresponding DAI."

"The issue described in this report allows an attacker to steal ALL collateral stored in the MCD system during the liquidation phase -- possibly within a single transaction. This would result in a complete loss of funds for all users. The cost of performing the attack is almost zero -- just the minimal denomination of each type of gem stolen plus gas."

"If exploited by hackers, the vulnerability could potentially have resulted in a single transaction wiping out all assets used as collateral to support the dai stablecoin if it had been undiscovered by launch."

"We have evaluated this and agree that leaving the Flip.kick function publicly callable opens an attack vector that could allow significant collateral loss during the End."

"We really appreciate you catching this bug and are accepting it as our first Critical finding in the program. We are awarding you the full $50,000 bounty. Congratulations!"

"Currently, there is over 1.5 million $ETH locked in Maker (1.4% of the total supply) worth over $250 million."

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.

Key Event Timeline - MakerDao Auction Lack of Validation

Date	Event	Description
October 1st, 2019	Main Event	Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.

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 $7,000,000 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?

General Prevention Policies

There were no user funds lost in this case.

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.