Rebasing tokens, which are not excluded from the audit, can be used as underlying assets for markets deployed using the protocol. Rebasing tokens can be implemented in various ways, but the critical point is when the balance of addresses holding the tokens gradually increases. As borrowers/market contracts hold these tokens while they are lent, the newly accrued tokens may either be credited to the borrower, or inside the market itself, which would count as the borrower adding liquidity. This can result in the borrower needing to pay a lower Annual Percentage Rate (APR) than initially set.
This issue can be mitigated in several ways:
Option 1: Disallow rebasing tokens from the protocol to prevent this situation.
Option 2: Add a warning to the documentation, informing users that when lending rebasing tokens, the rebasing interest their tokens gain while inside the market will be counted as the borrower paying down their debt.
Option 3 (Complicated): Implement functionality for rebasing tokens by checking the markets balance at each interaction and adding the change to a separate variable that tracks rebasing awards.
