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Reward sandwiching in VotiumStrategy

Summary

The reward system in VotiumStrategy can be potentially gamed by users to enter just before rewards are deposited and request an exit after that. Depending on the withdrawal queue, users may exit as early as the next epoch and avoid waiting the normal 16 weeks of vote locked CVX.

Impact

Voting in the Convex protocol requires a commitment of at least 16 weeks. Holders of CVX tokens can lock their tokens into vlCVX, which grants them voting power in Curve gauges.

The same mechanism is applied internally in the VotiumStrategy contract. Deposited ETH is swapped to CVX and locked for vlCVX. Withdrawals are executed in a queued fashion, by reserving tokens that will eventually expire in coming epochs. A user exiting the strategy may have enough tokens to exit their position as early as the next epoch.

This means that, under the right circumstances, a user may deposit in VotiumStrategy and withdraw from it in a short period of time. The user just needs to have available expirable tokens coming from previous deposits in the platform, not necessarily related to the ones coming from their deposit. This can potentially reduce the commitment, requiring much less time than the required 16 weeks when using Convex directly.

This would allow users to game the system and enter the protocol just to collect the rewards, with a minimal commitment in the platform.

Proof of Concept

Let's say an attacker is anticipating the claiming of rewards in VotiumStrategy, and let's assume also that there are enough tokens that will be expiring in the next epoch to sufficiently cover their position.

  1. The attacker deposits into the strategy just before rewards are claimed.
  2. Rewarder claims rewards and deposits them back into the strategy, increasing the value for holders.
  3. Right after that, the attacker requests a withdrawal. Since there are enough expirable tokens, the withdrawal is queued for the next epoch.
  4. The attacker just needs to wait for the next epoch to exit their position, along with the rewards.

Recommendation

This is a variation of a common attack in vaults that compound rewards, present in different yield protocols. The usual mitigation is to introduce some delay or penalty to avoid bad intentionally users from depositing just to earn the rewards and leave.

In this case, two possible solutions are:

  • Introduce some kind of minimum permanency delay for depositors. This could be the 16 weeks defined by Convex, or a fraction of it to be more flexible, e.g. 4 weeks.
  • Stream rewards over a period of time. Instead of just depositing back the rewards as an immediate increase of value, have these rewards be linearly unlocked over a period of time. This will cause depositors to stay within the protocol to collect the rewards.