ValueDeFi Incident: Incorrect Weighted Constant Product Invariant Calculation


This incident was due to the mis-calculation by the protocol on the adopted weighted constant product invariant for non 50–50 ratio pools. There is no flashloan or price manipulation involved. The consequence of mis-calculated invariant allows for draining of affected pool funds. Currently, the bug has been exploited to attack 9 non 50–50 ratio pools with the estimated loss of $11M.


Incorrect Weighted Constant Product Invariant Calculation

The vSwap pool is initially forked from UniswapV2 but with the support of non 50-50 ratio pools. The non 50-50 ratio pools require a different approach to calculate the weighted constant product, i.e., reserve0^(weight0/50) * reserve1^(weight1/50) <= balance0Adjusted^(weight0/50) * balance1Adjusted^(weight1/50). Because of the required exponentiation function, ValueDeFi makes use of the Bancor formula to calculate the above constant product as shown below.

The Funds

This attack leads to more than $11M loss from the affected 9 pools. And most of the attacker’s funds from the above exploitations are currently held in this wallet: b88a. We are actively monitoring this wallet for any movement.

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