Mushroom Finance Logic Error

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Mushroom Finance

Despite two audits, Mushroom Finance still had a smart contract logic error which could have allowed a malicious actor to steal some of the fund.

The error was corrected without being exploited and a bug bounty was paid. The smart contract has subsequently been audited a third time.

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

About Mushroom Finance

"Mushrooms Finance smart contracts out of inspiration from popular DeFi projects like Yearn Finance (YFI) Pickle Finance and Sushiswap among others. This project is fairly new (Oct 2020), but are picking up steam quickly. As a DeFi project, Mushrooms Finance deploys a fair-launch fashion from day1 to distribute the governance token (MM) among all its contributors: builder, liquidity provider, community..etc. Mushrooms Finance has integrated the ETH-USD Chainlink Price Feed, Mushrooms' smart contracts have a secure, fair-market price reference when checking the collateralization of its Maker CDPs(collateralized debt position). If collateralization is found to be below a certain threshold, then Mushrooms' smart contracts can execute actions to avoid user funds from being liquidated."

"Mushrooms Finance is a crypto-earning vault with a focus on seeking sustainable profit in the DeFi universe. The first version of the Mushrooms Finance smart contracts were inspired by other popular DeFi projects like Yearn Finance (YFI) and Sushiswap, among many others." "Mushrooms Finance Vaults help users earn passive profit on crypto assets like WETH, WBTC, DAI, USDC, and many more. The earning strategies associated with the Vaults will automate user yield farming on Alchemix or Curve by auto-compounding the profit. Vaults earn in the denomination of whatever token users deposited. Users will then receive mTokens upon Vault deposit which represent their share in that Vault. When users withdraw from the Vault, the mToken share allows users to withdraw both the principal plus any earned profit over the deposit period."

"CoinFabrik was asked to audit the contracts for the Mushroom project." Dedaub was also commissioned to perform a security audit. "Mushrooms Finance has a Bug Bounty program to encourage security white-hat hacker/developer to spend time studying our code in order to uncover vulnerabilities. We believe they should get fairly awarded for their time and effort and acknowledged for the remarkable contributions to entire community."

"Whitehat CKK Sec, who is a recipient of Immunefi’s Whitehat Scholarship, disclosed a critical vulnerability in Mushrooms Finance to Immunefi on June 8 that consisted of a logic error, leading to a flash loan attack vector that could have resulted in the loss of 19 wBTC, which at market rate at the time of the report comes out to $635,000."

"The vulnerability exists as a result of the interaction between two contracts in Mushrooms Finance: StrategyCmpdWbtcV1 (Strategy) and the MMVault (Vault). The Strategy contract has a flashloan function, mushroomsFlashloan(), that can be called by any user, which liquidates the held wBTC cTokens from Compound and supplies that wBTC to the Vault. This is obviously erroneous due to its original purpose for MMVault callback only. What this means is that an attacker can flashloan from the Vault and repay it via a vulnerable function present in Strategy. However, the vulnerability is not only possible because of that. The vulnerable mushroomsFlashloan() consists of a check that verifies if the Strategy contract has enough balance to even complete the flashloan taken from MMVault."

"This check can be bypassed due to the attacker being able to not only define the amount (_amount) but also the fee paid with the flashloan (_fee). The reason behind this is, that the vulnerable flashloan function was not intended to be callable by anyone, but instead to be called by the Vault only when the Vault’s flashloan is called. With the additional _fee-parameter the attacker could have bypassed several checks (which could make the attack more troublesome), and it would result in the Strategy-contract to withdraw wBTC from Compound which it supplied before."

"After receiving the report, Mushrooms Finance paused the contracts and is paying the whitehat a bounty of $60,000 for his find, $18,000 of which went to the Immunefi Whitehat Scholarship. The scholarship helps budding security researchers get a chance to take time off from full-time work, so they can hunt for bugs full-time. While the bounty is listed at $50,000 for critical bugs, Mushrooms Finance is paying $10,000 above that amount in recognition of the size of funds at risk. We thank Mushrooms Finance for their generosity and for taking security and responsibility seriously."

Subsequently, Mushroom Finance underwent a further audit by Peckshield.

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 - Mushroom Finance Logic Error

Date	Event	Description
June 23rd, 2021	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 $635,000 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

No user funds were 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.