Submitted by xiaoming90
BridgeFacet.sol#L541
SponsorVault.sol#L196
Assume the following:
At this point, attacker balances are as follows (2,000,000 USDC in total)
First, the attacker attempts to transfer an extremely large amount - 1,000,000 USDC from attackers address in Ethereum to attackers address in Optimism Chain. The transfer amount should be much larger than the rest of the routers liquidity so that only attackers router is capable of providing the liqudity.
In our example, since Router B does not have sufficient liquidity to faciliate the fast transfer, Router B will not be selected by the Sequencer. Since only Router A has sufficient liquidity, Router A, which is owned by the attacker, will faciliate the fast transfer and selected by the Sequencer.
Since the liquidity fee is 5%, Router A only need to supply 950,000 oUSDC on execute. The Sponsor will then reimburse 50% of the liquidity fee, which is25,000 oUSDC in total. The final amount of oUSDC send to the attackers wallet address in Optimism will be 975,000 oUSDC.
At this point, attacker balances are as follows (1,025,000 USDC in total)
When the nomad message arrives, the attacker will be reimbursed 1,000,000 oUSDC when BridgeFacet._reconcile is triggered.
At this point, attacker balances are as follows (2,025,000 USDC in total)
Attacker earned 25,000 USDC, and SponsorVault lost 25,000 USDC.
Router owner can intentionally perform many large transfer between their own wallets in two different domain to siphon all the funds from the SponsorVault, and then proceed to withdraw all liquidity from his router.
Although having a sponsor to subside the liqudity fee to encourage users to use sponsors chain, this subsidy can be gamed by malicious actors for their own benefits. It is recommended to reconsider the need of having a sponsor in Connext as extreme care have to be taken in its design to ensure that it will not be exploited.
LayneHaber (Connext) acknowledged and commented:
0xleastwood (judge) commented:
