👍Improper Implementation of EIP-2612 Permit Standard

EIP-2612 introduces a significant improvement to ERC-20 tokens by adding a "Permit" function that allows gasless approvals. With this standard, users can approve token transfers through signed messages (off-chain), rather than having to submit on-chain approval transactions. This reduces the number of transactions required and helps users save on gas fees. However, failing to fully implement EIP-2612 can result in critical vulnerabilities, especially for applications that expect strict adherence to the standard.

In this tutorial, we will explain the purpose of EIP-2612, explore the potential vulnerabilities of non-compliance with the standard, and show how to properly implement it to avoid these issues.

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Understanding EIP-2612: Permit Function and Gasless Approvals

EIP-2612 allows for the Permit function, which enables users to approve ERC-20 token transfers by signing a message that can be submitted by another party. This eliminates the need for an on-chain approval transaction, reducing the number of transactions required to approve and transfer tokens.

The key feature of EIP-2612 is the following function:

function permit(
    address owner,
    address spender,
    uint256 value,
    uint256 deadline,
    uint8 v,
    bytes32 r,
    bytes32 s
) external;

Additionally, the standard requires the implementation of a DOMAIN_SEPARATOR() function, which ensures that signed messages can be verified as belonging to the correct contract instance. This is essential to prevent replay attacks across different chains or contract instances.

function DOMAIN_SEPARATOR() external view returns (bytes32);

Vulnerability: Improper EIP-2612 Implementation

A key vulnerability occurs when the contract does not properly implement the DOMAIN_SEPARATOR function or deviates from the required standard. In the case of an example found in the wild, the function was implemented as domainSeparator(), which is a different function name than required by EIP-2612. This leads to incompatibility with other contracts, tools, and services that expect the standard DOMAIN_SEPARATOR() function.

This improper implementation can introduce several issues:

1. Incompatibility with Services and Contracts: Other protocols and services that strictly adhere to the EIP-2612 standard rely on the DOMAIN_SEPARATOR() function to verify signed messages. Without this function, the token contract becomes incompatible with services that use this mechanism, limiting the token's utility.

2. Lack of Gasless Approvals: Tools and exchanges that enable gasless approvals may not recognize the token as compatible with EIP-2612, preventing users from utilizing this functionality. As a result, users are forced to pay additional gas fees for approvals, which defeats the purpose of EIP-2612's optimization.

3. Replay Attack Risk: The absence of a properly implemented DOMAIN_SEPARATOR() can increase the risk of replay attacks, where signed messages from one chain or contract instance can be reused (replayed) on another chain. This opens up potential security vulnerabilities that can be exploited by malicious actors.

Conclusion

The EIP-2612 standard enables gasless approvals and improved security through the use of off-chain signatures and domain separators. Failing to implement the standard properly, such as using an incorrect function name for DOMAIN_SEPARATOR(), can result in a range of vulnerabilities, including incompatibility with other protocols, higher gas fees for users, and increased risk of replay attacks.

By following this tutorial and ensuring strict adherence to EIP-2612, you can avoid these vulnerabilities and provide users with a secure and efficient token experience. Proper implementation ensures compatibility with various services and tools, enabling users to fully benefit from the gas-saving and security features of EIP-2612.