Submitted by harleythedog
There are several ERC20 tokens that take a small fee on transfers/transferFroms (known as fee-on-transfer tokens). Most notably, USDT is an ERC20 token that has togglable transfer fees, but for now the fee is set to 0 (see the contract here: https://etherscan.io/address/0xdAC17F958D2ee523a2206206994597C13D831ec7#code). For these tokens, it should not be assumed that if you transfer x tokens to an address, that the address actually receives x tokens. In the current test environment, DAI is the only collateralToken available, so there are no issues. However, it has been noted that more pools will be added in the future, so special care will need to be taken if fee-on-transfer tokens (like USDT) are planned to be used as collateralTokens.
For example, consider the function purchaseArbitrageTokens in Auction.sol. This function transfers realCommitment amount of collateralToken to the liquidityExtension, and then calls purchaseAndBurn(realCommitment) on the liquidityExtension. The very first line of purchaseAndBurn(amount) is require(collateralToken.balanceOf(address(this)) >= amount, "Insufficient balance");. In the case of fee-on-transfer tokens, this line will revert due to the small fee taken. This means that all calls to purchaseArbitrageTokens will fail, which would be very bad when the price goes below peg, since no one would be able to participate in this auction.
See purchaseArbitrageTokens here: https://github.com/code-423n4/2021-11-malt/blob/c3a204a2c0f7c653c6c2dda9f4563fd1dc1cecf3/src/contracts/Auction.sol#L177
See purchaseAndBurn here: https://github.com/code-423n4/2021-11-malt/blob/c3a204a2c0f7c653c6c2dda9f4563fd1dc1cecf3/src/contracts/LiquidityExtension.sol#L117
Add logic to transfers/transferFroms to calculate exactly how many tokens were actually sent to a specific address. In the example given with purchaseArbitrageTokens, instead of calling purchaseAndBurn with realCommitment, the contract should use the difference in the liquidityExtension balance after the transfer minus the liquidityExtension  balance before the transfer.
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Alex the Entreprenerd (judge) commented:
