X12 - Bonds will not work with stETH

[sherlock-admin4]

X12

Medium

Bonds will not work with stETH

Summary

stETH rebases will get stuck inside the bond contract.

Vulnerability Detail

stETH will be one of the three (or four, including ETH) whitelisted tokens.

Whitelisted tokens:
- ETH
- WETH - https://etherscan.io/token/0xc02aaa39b223fe8d0a0e5c4f27ead9083c756cc2
- STETH - https://etherscan.io/token/0xae7ab96520de3a18e5e111b5eaab095312d7fe84
- WSTETH - https://etherscan.io/token/0x7f39c581f595b53c5cb19bd0b3f8da6c935e2ca0

Tokens are not kept in the Vault but are deposited into bonds. However, when stETH is deposited into bonds with DefaultBondModule::depost, the bond contracts won't account for rebasing tokens. Here is an example of a bond deposit/withdrawal:

https://etherscan.deth.net/address/0xB56dA788Aa93Ed50F50e0d38641519FfB3C3D1Eb

    function deposit(address recipient, uint256 amount) public nonReentrant returns (uint256) {
        uint256 balanceBefore = IERC20(asset).balanceOf(address(this));
        IERC20(asset).transferFrom(msg.sender, address(this), amount);
        amount = IERC20(asset).balanceOf(address(this)) - balanceBefore;

        if (amount == 0) {
            revert InsufficientDeposit();
        }

        if (totalSupply() + amount > limit) {
            revert ExceedsLimit();
        }

        _mint(recipient, amount);
        emit Deposit(msg.sender, recipient, amount);
        return amount;
    }

    function withdraw(address recipient, uint256 amount) external {
        if (amount == 0) {
            revert InsufficientWithdraw();
        }

        _burn(msg.sender, amount);
        IERC20(asset).safeTransfer(recipient, amount);
        emit Withdraw(msg.sender, recipient, amount);
    }

As shown, deposit and withdraw functions do not account for shares but simply mint/burn the deposited amount. This means that if an stETH rebase is triggered, the bond contract will not account for it, causing the rebase value to remain stuck inside the contract.

Impact

The Vault loses out on stETH rebases.

Code Snippet

    function withdraw(address recipient, uint256 amount) external {
        if (amount == 0) {
            revert InsufficientWithdraw();
        }

        _burn(msg.sender, amount);
        IERC20(asset).safeTransfer(recipient, amount);
        emit Withdraw(msg.sender, recipient, amount);
    }

Tool used

Manual Review

Recommendation

Use bond contracts that calculate assets based on the shares owned.