Known Origin Digital Asset Audit

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CoinFabrik specializes in auditing and developing Dapps.

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Introduction

CoinFabrik was asked to audit the contracts for the Known Origin Digital Asset v3 project. First we will provide a summary of our discoveries and then we will show the details of our findings.

Summary

The contracts audited are from the Known Origin Next Generation Project repository at this link
(https://github.com/knownorigin/known-origin-contracts-next-gen). The audit started based on the commit bcbd6b7bfe7e69ef44cb7d1ed524ca810a86d2dc, and was updated to reflect changes based on this second commit: bede703e34f5ca4878cc5dcebc7a2f9fa649b189.
The project includes several contracts (listed below) which define a token and a marketplace to handle the sales of these tokens. Four types of listing types are supported: Buy now, Stepped auctions, Reserve auctions, and Offers.

Contracts

The audited contracts are:

● core/BaseKoda.sol: Basic abstract contract with basic token functionality
● core/KnownOiginDigitalAssetV3.sol: Main token contract
● core/Konstants.sol
● core/IERC721Ownable.sol
● core/IERC2309.sol
● core/IERC2981.sol
● core/composable/TopDownERC20Composable.sol: abstract contract defining
token.
● marketplace/BaseMarketplace.sol: abstract contract with basic marketplace
functionality
● marketplace/KODAV3PrimaryMarketplace.sol: Contract handling primary
sales
● marketplace/KODAV3SecondaryMarketplace.sol: Contract handling
secondary sales
● marketplace/BuyNowMarketplace.sol: Contract handline on-the-moment
sales.
● marketplace/ReserveAuctionMarketplace.sol: Contract handling Auctions.

Analyses

The following analyses were performed:

● IMisuse of the different call methods
● Integer overflow errors
● Division by zero errors
● Outdated version of Solidity compiler
● Front running attacks
● Reentrancy attacks
● Misuse of block timestamps
● Softlock denial of service attacks
● Functions with excessive gas cost
● Missing or misused function qualifiers
● Needlessly complex code and contract interactions
● Poor or nonexistent error handling
● Failure to use a withdrawal pattern
● Insufficient validation of the input parameters
● Incorrect handling of cryptographic signatures

Severity Classification

Security risks are classified as follows:

Critical: These are issues that we manage to exploit. They compromise the
system seriously. They must be fixed immediately.
Medium: These are potentially exploitable issues. Even though we did not
manage to exploit them or their impact is not clear, they might represent a
security risk in the near future. We suggest fixing them as soon as possible.
Minor: These issues represent problems that are relatively small or difficultto take advantage of but can be exploited in combination with other issues. These kinds of issues do not block deployments in production environments. They should be taken into account and be fixed when possible.
Enhancement: These kinds of findings do not represent a security risk. They are best practices that we suggest to implement.

This classification is summarized in the following table:

Findings and Fixes

The table below summarizes findings. Details follow in the next section.

Issues Found by Severity

Critical severity

No issues found

Medium severity

ME-01 Insufficient Input Validation

The function isEditionSoldOut in the KnownOriginDigitalAssetV3.sol contract does not check whether the sought editionId exists, hence when queried with an inexistent tokenId the function returns true.
This could lead users to think that an edition exists when it does not and may mislead actions like airdrops or reward mechanisms if the public function editionExists() is not used previously.

Recommendation

Add a require statement like in similar functions. For example,
require(_editionExists(_editionId), “Edition does not exist”);

Status

The recommendation was applied and the issue no longer exists.

ME-02 Bid Deniability in placeTokenBid() Function

In placeTokenBid(uint256 _tokenId) and rejectTokenBid(uint256
_tokenId)
functions (repeated in the KodaV3PrimaryMarketplace.sol and KodaV3SecondaryMarketplace.sol) there are calls to _refundBidder() in those cases where an earlier offer was made. Since _refundBidder() requires the refund to be successful, a bidder could block others from placing bigger bids by simply refusing the transfer.
The malicious bidder would then win the bid, manipulating the result of the auction.

Recommendation

Decouple bidding from refund (the success of the refund should not be required for a new bid to be placed).

Refunds are placed in a refund queue but the bid is immediately replaced. For example, add a structure to store missed refunds which acts as a queue and a periodic procedure which handles these refunds.

Status

A successful refund is no longer required for someone to outbid an existing bid. The issue no longer exists. Documentation should reflect this.

Minor Severity

MI-01 Lost Offers Due To Faulty Design

A drawback on the bidding logic in KODAV3PrimaryMarketplace.sol could result in losing valid offers when a sale is not made before the bidLockupPeriod. An example follows: a first buyer (buyer_A) places an offer. As a result, the editionOffers mapping is updated as follows:

editionOffers[_editionId] = Offer(msg.value, (1)
_msgSender(),
_getLockupTime());

Next, a second buyer (buyer_B) places a second and better offer, and as a result buyer_A is refunded and this second offer replaces offer (1) above, thus updating editionOffers. If the lockup period has elapsed (timestamp >= lockupUntil), then buyer_B may cancel the offer using withdrawEditionBid() later and no bid remains.

Recommendation

Allow bidders to optionally maintain their bid, even if it is not the best bid, by storing losing bids until the auction is finished.

Status

Development team claims this is the expected behavior, explaining that the lockout period may be chosen to prevent this, and off-chain events (such as emails) notify owners when new bids are received. These actions do mitigate the issue thus minimizing the risk.

MI-02 Bidder with Best Bid May Be Ignored

When a token creator calls convertOffersToBuyItNow() and there already is an offer, the bidder is refunded. This happens even in the case when

offer.offer >= _listingPrice

in which case, the bidder could be outpaced by another buyer. Moreover, this new buyer could be paying an amount smaller than offer.offer! Hence, both the initial bidder and token creator would lose.

Recommendation

Allow bidders to optionally have their bids automatically converted into buys if the creator converts the offer from type ‘listing’ to ‘buy now’.

Status

Development team claims this is the expected behavior, explaining that the owner can change from “offer” to “buy now” at his discretion. Documentation should thus reflect this, so owners can make informed decisions.

MI-03 Front-running Attack on acceptTokenBid()

A malicious bidder could pay a smaller-than-expected price using a front-running attack on the bid-acceptance call. Assume the following situation:

  1. a bidder made a winning offer (e.g., through the function placeTokenBid()),
  2. _offerPrice is strictly smaller than offer.offer,
  3. the lockupUntil time has elapsed, and
  4. the owner calls acceptTokenBid().

Then, the bidder could successively withdraw his initial offer and make one for offerPrice hence saving offer.offer - _offerPrice.

Recommendation

Document the impact of this front running advantage and warn users about this possibility.

Status

Development team claims this is the expected behavior, explaining that an informed owner can select the value _offerPrice at his discretion; hence choosing this to be equal to offer.offer does eliminate the problem. Documentation should thus reflect this, so owners can make informed decisions.

MI-04 Function Enabling Arbitrary Callers Leads to Auction Deniability

An arbitrary contract may call listForReserveAuction on a token if this is an edition of size one. Moreover, if the token is already listed in a reserve auction, whenever someone wants to call placeBidOnReserveAuction(), a malicious user could front-run him calling listForReserveAuction setting a reserveAuction.startDate in the future so that the bid is rejected.

Recommendation

This issue would not exist if only token creators are allowed to call this function.

Status

The recommendation was applied and the issue was eliminated.

MI-05 Repeated Structures May Lead to Data Mismatch

The parameters editionDetails[editionId].uri may be also obtained through the tokenUriResolver interface (tokenUriResolver.editionURI(editionId)). In fact, the function editionURI will use the latter if tokenUriResolverActive() returns True or else the former.

Status

Development Team explains that the data mismatch is expected as the token resolver will become the defacto returned data payload once called and set, super seeding any original uri set on creation. The business rule would fix the issue.

Enhancements

EN-01 Possible Reduction in Variable Size

The variable editionSize is created as an uint96, but it holds integers that are bounded by MAX_EDITION_SIZE which is initialized as 1000. We can have editionSize to be uint16 (allowing MAX_EDITION_SIZE to grow up to 65k).

Status

Not completely fixed.

EN-02 Untight Packing Leading to Excess Gas Spent

The function getEditionDetails(uint256 _tokenId) in the
KnownOriginDigitalAssetV3.sol contract returns the following values

(address _originalCreator, address _owner, uint256 _editionId, uint256 _size, string memory _uri)

of respective sizes 160, 160, 256, (256), 59. These are not tightly packed into 32 byte slots and hence could lead to inefficient gas spends.

Recommendation

Modifying the output so that _size is of the smallest possible uint and placing uint256 return values at the start, reduces gas.

Status

Fixed.

EN-03 Variables with the same name may lead to problems

In both contracts BaseKoda.sol and KodaV3SecondaryMarketplace.sol a
variable named secondarySaleRoyalty is defined, with the same objective. In both contracts the value is initialized as

uint256 public secondarySaleRoyalty = 12_50000

and can be changed only by an admin. However, the admin could call only one of the update functions and the values would fall out of sync.

Status

Development team understands the risks and answered that there are business processes in place to align changes in both variables.

EN-04 Spurious Data in editionDetails

The struct editionDetails contains three items: the creator, editionSize and an URI of a token. However, the URI may also be stored in another map which can be accessed through the proxy tokenUriResolver. So, eventually, when the proxy is used for URIs, the editionDetails will have outdated information in the URI entry but should be updated in the other two entries. This may lead to synchronization problems

Status

Development Team explains that the token resolver will become the defacto
returned data payload once called and set, super seeding any original uri set on creation. This fixes the issue.

EN-05 Division-by-Zero Not Prevented

The functions updateModulo and updateBasisPointsModulo allow modulus to be set to zero. A ‘require‘ statement should prevent this.

Status

The issue has been fixed.

Relevant Observations

Inaccurate Check With Negligible Impact

The implementation of _safeTransferFrom uses the code

uint256 receiverCodeSize;
assembly {
receiverCodeSize := extcodesize(_to)
}
if (receiverCodeSize > 0) {…}

which may be called by a maliciously-crafted contract that appears to have code of size 0, and therefore the check fails. This check should be used with care even if the security impact of the to_ being a contract is negligible.
A known old example (a zero-length-code Attacker contract cheating a Victim contract) follows:

Conclusion

The Known Origin project introduces new trading mechanisms on its marketplace which introduce new attack vectors that have not been analyzed for the known mechanisms used in other published marketplaces. Especially in which refers to front-running attacks and correct cryptographic validations.
ME-01 issue is related to the problems caused by behavior users expect from a specific function based on its name. ME-02 issue describes a situation in which bids could get stuck. While there is a function that the owner could call to recover from these situations, the system should not rely on this contingency mechanism.
The minor issues we found are related to a lack of documentation that may lead users to misuse the functions as intended or not be aware of the possible front-running advantages that could take place.
The enhancements we propose are related to reducing gas consumption,
preventing a division-by-zero scenario and mitigating the risk of having different values for the variables that are declared with the same name in two different contracts. We also posed a relevant observation regarding the use of an inaccurate method to verify whether a given address is a smart contract or not.
All medium-severity issues have been fixed and minor-severity issues have either been fixed, should be fixed through business rules that are to be applied on-chain, or have been accepted as they are part of the expected behaviour. In that case, documentation and business processes reduce the risk to something that is negligible.

Disclaimer: This audit report is not a security warranty, investment advice, or an approval of the Known Origin Digital Asset project since CoinFabrik has not reviewed its platform. Moreover, it does not provide a smart contract code faultlessness guarantee.


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