#2 Unrestricted fee rates can cause the stability of the protocol

Severity

Low Risk

Relevant GitHub Links

https://github.com/Cyfrin/2023-12-the-standard/blob/c12272f2eec533019f2d255ab690f6892027f112/contracts/LiquidationPoolManager.sol#L28

https://github.com/Cyfrin/2023-12-the-standard/blob/c12272f2eec533019f2d255ab690f6892027f112/contracts/LiquidationPoolManager.sol#L84-L86

https://github.com/Cyfrin/2023-12-the-standard/blob/c12272f2eec533019f2d255ab690f6892027f112/contracts/SmartVaultManagerV5.sol#L103-L113

Summary

The contracts LiquidationPoolManager and SmartVaultManagerV5 exhibit a vulnerability where fee parameters (poolFeePercentage, mintFeeRate, burnFeeRate, and swapFeeRate) are susceptible to unbounded values. This oversight could lead to the imposition of exorbitant fees, potentially deterring user engagement, causing economic instability, and resulting in unpredictable protocol behavior.

Vulnerability Details

Both contracts lack constraints or validation checks on key fee parameters. Specifically:

1. LiquidationPoolManager: The poolFeePercentage has no upper limit set, allowing the contract owner to define excessive fees for liquidation.
2. SmartVaultManagerV5: The mintFeeRate, burnFeeRate, and swapFeeRate are also not constrained, enabling the setting of unbounded fee percentages for various operations within the smart vault management.

Impact

LiquidationPoolManager.sol contract: Unrestricted fee settings within the LiquidationPoolManager contract pose a significant threat to the stability and fairness of the protocol. High or unchecked fees might result in market distortions, unfair trading conditions, and potential economic instability. And absence of limitations on fee configurations could result in a loss of user confidence, leading to a perception of unpredictability and exploitation within the protocol's operations.

SmartVaultManagerV5.sol contract: Unbounded fee settings in SmartVaultManagerV5 present a vulnerability, potentially leading to market instability, unfair conditions, and adverse economic effects. Unchecked fee structures might erode user trust by creating an unpredictable and potentially exploitative environment within the protocol's ecosystem.

Tools Used

Manual review.

Recommendations

Add reasonable upper limits for fee parameters to prevent the imposition of excessively high fees.