🛑Tutorial 36: Handling Edge Cases of Banned Addresses in DeFi
In decentralized finance (DeFi), there are instances where certain addresses may be blacklisted or banned by a protocol. This could be due to regulatory concerns, protocol violations, or security reasons. Handling these banned addresses becomes crucial for ensuring that protocols operate securely and fairly. If edge cases related to banned addresses are not handled properly, they can create vulnerabilities, such as the ability for malicious actors to bypass security checks or the inability to recover funds from transactions involving banned addresses.
In this tutorial, we will explore edge cases related to banned addresses in DeFi protocols, understand how they can be exploited, and suggest mitigation strategies to handle these edge cases.
Understanding Banned Address Edge Cases
In DeFi, smart contracts are often designed to check certain conditions before executing transactions. For example, a user might be prohibited from interacting with the protocol if their address has been banned. However, in complex systems where multiple stages are involved (such as cross-chain bridges, staking, and swaps), there can be edge cases where banned addresses aren't properly handled, leading to potential vulnerabilities.
Here are some common scenarios where edge cases involving banned addresses can arise:
Cross-Chain Bridges: In cross-chain systems, a transaction might be placed in a "retriable" state when an operation fails (e.g., due to insufficient gas). If the user becomes banned during this period, the system might still allow the transaction to be retried, resulting in unexpected behavior.
Pending Transactions: A user might submit a transaction before being banned, and if that transaction is delayed or retried later (for example, after a protocol upgrade), the protocol might still process the transaction even though the user is now banned.
Blacklisting in ERC20 or Governance Contracts: Some protocols have blacklists or ban lists for addresses that aren't allowed to transfer tokens or participate in governance. Failing to check these ban lists at critical points, such as when retrying transactions or processing pending actions, can lead to protocol violations.
Example 1: Cross-Chain Bridges
In a cross-chain bridge, users can transfer assets between two blockchains (e.g., Ethereum and Binance Smart Chain). If a transaction fails (e.g., due to a gas limit or network issues), it might enter a retriable state, where the user or the protocol can retry the transaction later.
However, if the user becomes banned during this period, they may still be able to retry the transaction, potentially bypassing the ban. This edge case arises because the protocol fails to check the banned address list during the retry phase.
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