Description

For stake-pool bonds and solo validator bonds, the following code is used to calculate the amount of YTs that should be minted for a deposit.

// Calculations here round down intentionally to remove risk of rounding error attacks.
pub fn calc_yt_to_mint(&self, lst_state: &LstState, deposit_amount: u64, now: i64) -> u64 {
    let principal_lamports = lst_state.lamports_for_lst(deposit_amount);
    let numerator =
        U192::try_from(
            self.maturity_ts
                .checked_sub(now)
                .expect("underflow")
        ).expect("u64");
    let denominator = U192::try_from(
        self.maturity_ts
            .checked_sub(self.issuance_ts)
            .expect("underflow"),
    )
    .expect("u64");
    U192::from(principal_lamports)
        .checked_mul(numerator)
        .expect("overflow")
        .checked_mul(U192::from(PT_YT_DECIMAL_FACTOR))
        .expect("overflow")
        .checked_div(denominator)
        .expect("overflow")
        .checked_div(U192::from(LAMPORTS_PER_SOL))
        .expect("overflow")
        .as_u64()
}

Note that the formula for the amount of yield tokens that are minted is linear over time.

Impact

This allows an attacker to deposit a large amount of tokens just before the bond matures, capturing a large portion of the yield while only depositing into the bond for a very short time. Because of compound-interest effects, the earlier depositors should theoretically have a much larger share of the yields as they have contributed to a larger share of the yields. In practice, depositing just before a reward-distribution event has significant advantages. Potentially, an attacker could cycle through many bonds, depositing in all of them at the last second and being entitled to a significant portion of the yield despite not contributing to it.

Recommendations

Change the economic incentives so that earlier depositors are properly rewarded.

Remediation