Broad Khaki Wasp - Incorrect rounding in the ReputationMarket._calcCost() function.

[sherlock-admin3]

Broad Khaki Wasp

Medium

Incorrect rounding in the ReputationMarket._calcCost() function.

Summary

When buying and selling, the cost is calculated using rounding based on isPositive. However, the rounding should be based on isBuy, not isPositive.

Root Cause

The _calcCost() function calculates cost by rounding based on isPositive.

If isPositive is false (indicating that DISTRUST votes are being traded), the calculation is rounded up.

Consider the following scenario:

1. A user buys 2 DISTRUST votes.
2. The user sells a DISTRUST vote.
3. The user sells another DISTRUST vote.

During the buying process, rounding up occurs once, but when selling, rounding up occurs twice—at steps 2 and 3. As a result, marketFunds will be decremented by a dust amount.

If marketFunds was originally 0 (with the market created by the admin at a 0 creation cost), then step 3 becomes impossible.

In fact, isPositive is never related to the rounding direction.

      function _calcCost(
        Market memory market,
        bool isPositive,
        bool isBuy,
        uint256 amount
      ) private pure returns (uint256 cost) {
        ...

        int256 costRatio = LMSR.getCost(
          market.votes[TRUST],
          market.votes[DISTRUST],
          voteDelta[0],
          voteDelta[1],
          market.liquidityParameter
        );

        uint256 positiveCostRatio = costRatio > 0 ? uint256(costRatio) : uint256(costRatio * -1);
        // multiply cost ratio by base price to get cost; divide by 1e18 to apply ratio
        cost = positiveCostRatio.mulDiv(
          market.basePrice,
          1e18,
1057      isPositive ? Math.Rounding.Floor : Math.Rounding.Ceil
        );
      }

Internal pre-conditions

External pre-conditions

Attack Path

Impact

The last vote might not be sold.

PoC

Mitigation

Use !isBuy instead of isPositive.

        cost = positiveCostRatio.mulDiv(
          market.basePrice,
          1e18,
-         isPositive ? Math.Rounding.Floor : Math.Rounding.Ceil
+         !isBuy ? Math.Rounding.Floor : Math.Rounding.Ceil
        );