Submitted by unforgiven
https://github.com/reserve-protocol/protocol/blob/df7ecadc2bae74244ace5e8b39e94bc992903158/contracts/p1/RToken.sol#L563-L573
https://github.com/reserve-protocol/protocol/blob/df7ecadc2bae74244ace5e8b39e94bc992903158/contracts/p1/RToken.sol#L801-L814
https://github.com/reserve-protocol/protocol/blob/df7ecadc2bae74244ace5e8b39e94bc992903158/contracts/p1/RToken.sol#L219
https://github.com/reserve-protocol/protocol/blob/df7ecadc2bae74244ace5e8b39e94bc992903158/contracts/p1/Furnace.sol#L70-L84
Function melt() melt a quantity of RToken from the callers account, increasing the basket rate. basket rate should be between 1e9 and 1e27 and function requireValidBUExchangeRate() checks that if its not in interval the the code would revert. the call to requireValidBUExchangeRate() happens in the function mint(), melt() and setBasketsNeeded() which are used in issue() and handoutExcessAssets() and compromiseBasketsNeeded() which are used in multiple functionality of the systems. early malicious user can call issue(1e18) and melt(1e18 - 1) and then set the ratio between baskets needed and total supply to 1e27 and then any new action that increase the ratio would fail. because during the issue() code calls melt() so the issue() would fail for sure and other functionalities can increase the ratio because of the ratio too because of the rounding error which result in revert. so by exploiting this attacker can make RToken to be in broken state and most of the functionalities of the system would stop working.
This is melt() code:
As you can see it allows anyone to burn their RToken balance. This is requireValidBUExchangeRate() code:
As you can see it checks and makes sure that  the BU to RToken exchange rate to be in [1e-9, 1e9]. so Attacker can perform this steps:
So attacker can make protocol logics to be broken and then RToken wont be useless and attacker can perform this attack to any newly deployed RToken.
VIM
Dont allow everyone to melt their tokens or dont allow melting if totalSupply() become very small.
tmattimore (Reserve) disagreed with severity and commented:
0xean (judge) decreased severity to Medium and commented:
tbrent (Reserve) mitigated:
Status: Not fully mitigated. Full details in reports from HollaDieWaldfee and 0xA5DF (here and here). Also included in Mitigation Review section below.
