LEEQUID - Staking

1 Executive Summary

This report presents the results of our engagement with LEEQUID to review their liquid staking solution.

The review was conducted over two weeks, from September 4, 2023 to September 19th, by Rai Yang and Chingiz Mardanov. A total of 20 person-days were spent.

LEEQUID is a protocol targeting the LUKSO chain and the corresponding LYX token, aiming to to become the goto liquid staking solution of the ecosystem.

Most contracts that were part of this engagement were modified from the StakeWise V2 repository that can be found here. Primary modifications from the StakeWise contracts are reward withdrawal mechanisms that is enabled on the LUKSO chain. An unstake mechanism (validator exiting) as well as unstake/stake order matching component for efficient unstaking are also added to the protocol.

2 Scope

Our review focused on the commit hash c7348f2c421b0c8d4bfacf746bfbb882e18cce13. The list of files in scope can be found in the Appendix.

2.1 Objectives

Together with the LEEQUID team, we identified the following priorities for our review:

  1. Correctness of the implementation, consistent with the intended functionality and without unintended edge cases.
  2. Identify known vulnerabilities particular to smart contract systems, as outlined in our Smart Contract Best Practices, and the Smart Contract Weakness Classification Registry.

3 System Overview

  • Pool - Main entrypoint contract through which all of the staking is initiated.

  • StakedLyxToken - Token that represents the users share of the staked LYX token. This token is non-rebasing and the un-staking process is also initiated via this contract by creating and UnstakeRequest. The matching logic between the new deposits and the previously created UnstakeRequests also happens in this contract.

  • Rewards - Contract responsible for the distributing and accumulating the rewards generated by the staking operations.

4 Recommendations

4.1 No Setup for Automated Testing of Key Invariants


The codebase contains a test suite to catch regressions and to test functionality using manually selected test inputs. However, it seems like there is no setup for automated testing of key system properties/invariants, for instance, using fuzzing, symbolic execution, or formal verification. Such tools are able to automatically find test inputs that violate key invariants. For this reason, they are starting to become an important factor when assessing the maturity of a codebase (see, for instance, ToB’s code maturity evaluation criteria).


We recommend to identify key system invariants (for instance, using our Scribble specification language), and to set up automated security tools, such as Echidna, Forge, and Diligence Fuzzing, to check those invariants. In general, we recommend to use as many tools as possible. Our blog post on fuzzer benchmarking tries to provide some guidance on how to prioritize tools. However, a tool’s effectiveness can vary greatly for different system components.

5 Security Specification

This section describes, from a security perspective, the expected behavior of the system under audit. It is not a substitute for documentation. The purpose of this section is to identify specific security properties that were validated by the audit team.

5.1 Actors

The relevant actors are listed below with their respective abilities:

  • User - User stakes LYX and earns rewards from liquidity staking and validator rewards in sLYX as well as unstakes sLYX

  • Oracle - Off-chain component that monitors and tracks the state of the beacon chain.

  • Orchestrator - Off-chain component that collects oracle’s votes and publishes the reward data, registers new and updates the state of the activated and exited validators as well as manages un-stake operations through exiting validators.

  • Operator - account that is allowed to add new validators to the system, currently only one operator, the Leequid team.

  • Admin - account that is allowed to upgrade the contracts as well as onboard new operators.

5.2 Trust Model

In any system, it’s important to identify what trust is expected/required between various actors. For this audit, we established the following trust assumptions:

  • Oracles track onchain data correctly and timely
  • Orchestrator performs reward publishing, validator registration, validator state updating correctly and timely
  • Admin manages operator, oracle and orchestrator and performs contract upgrade correctly

6 Findings

Each issue has an assigned severity:

  • Minor issues are subjective in nature. They are typically suggestions around best practices or readability. Code maintainers should use their own judgment as to whether to address such issues.
  • Medium issues are objective in nature but are not security vulnerabilities. These should be addressed unless there is a clear reason not to.
  • Major issues are security vulnerabilities that may not be directly exploitable or may require certain conditions in order to be exploited. All major issues should be addressed.
  • Critical issues are directly exploitable security vulnerabilities that need to be fixed.

6.1 No Protection of Uninitialized Implementation Contracts From Attacker Medium ✓ Fixed


In the contracts implement Openzeppelin’s UUPS model, uninitialized implementation contract can be taken over by an attacker with initialize function, it’s recommended to invoke the _disableInitializers function in the constructor to prevent the implementation contract from being used by the attacker. However all the contracts which implements OwnablePausableUpgradeable do not call _disableInitializers in the constructors



contract Rewards is IRewards, OwnablePausableUpgradeable, ReentrancyGuardUpgradeable {


contract Pool is IPool, OwnablePausableUpgradeable, ReentrancyGuardUpgradeable {


contract StakedLyxToken is OwnablePausableUpgradeable, LSP4DigitalAssetMetadataInitAbstract, IStakedLyxToken, ReentrancyGuardUpgradeable {



Invoke _disableInitializers in the constructors of contracts which implement OwnablePausableUpgradeable including following:


6.2 Unsafe Function receiveFees Minor  Acknowledged


In the Pool contract, function receiveFees is used for compensate a potential penalty/slashing in the protocol by sending LYX back to the pool without minting sLYX, but the side effect is that anyone can send LYX to the pool which could mess up pool balance after all validator exited, in fact it can be replaced by a another function receiveWithoutActivation with access control which does the same thing.



function receiveFees() external payable override {}


function receiveWithoutActivation() external payable override {
    require(msg.sender == address(stakedLyxToken) || hasRole(DEFAULT_ADMIN_ROLE, msg.sender), "Pool: access denied");


Remove function receiveFees

6.3 Unnecessary Matching in Unstake Process Minor ✓ Fixed


Function unstakeProcessed in StakedLyxToken contract, when unstakeAmount > totalPendingUnstake, all the unstake requests should be able to be processed, thus no need to go through the matching, as a result, extra gas in the matching can be saved.



if (unstakeAmount > totalPendingUnstake) {
    pool.receiveWithoutActivation{value: unstakeAmount - totalPendingUnstake}();
    unstakeAmount = totalPendingUnstake;

totalPendingUnstake -= unstakeAmount;
totalUnstaked += unstakeAmount;
uint256 amountToFill = unstakeAmount;

for (uint256 i = unstakeRequestCurrentIndex; i <= unstakeRequestCount; i++) {
    UnstakeRequest storage request = _unstakeRequests[i];
    if (amountToFill > (request.amount - request.amountFilled)) {
        amountToFill -= (request.amount - request.amountFilled);
    } else {
        if (amountToFill == (request.amount - request.amountFilled) && i < unstakeRequestCount) {
            unstakeRequestCurrentIndex = i + 1;
        } else {
            request.amountFilled += uint128(amountToFill);
            unstakeRequestCurrentIndex = i;


Put the matching part (line 393-411) into else branch of if unstakeAmount > totalPendingUnstake, change the if branch into following:

if (unstakeAmount > totalPendingUnstake) {
            pool.receiveWithoutActivation{value: unstakeAmount - totalPendingUnstake}();
            unstakeAmount = totalPendingUnstake;
            totalPendingUnstake = 0;
            unstakeRequestCurrentIndex = unstakeRequestCount;
            _unstakeRequests[unstakeRequestCount].amountFilled = _unstakeRequests[unstakeRequestCount].amount;

6.4 Redundant Parameter in the Initialize Function


In the initialize function of the Pool contract, the parameter _withdrawalCredentials is redundant, as all validator’s withdrawal credentials are set to the address of the Reward contract and reward contract’s address is already set by the initialization parameter _rewards .



function initialize(
    address _admin,
    address _stakedLyxToken,
    address _rewards,
    address _validators,
    address _oracles,
    bytes32 _withdrawalCredentials,
    address _validatorRegistration,
    uint256 _minActivatingDeposit,
    uint256 _pendingValidatorsLimit
) public initializer {
    require(_stakedLyxToken != address(0), "Pool: stakedLyxToken address cannot be zero");
    require(_rewards != address(0), "Pool: rewards address cannot be zero");
    require(_admin != address(0), "Pool: admin address cannot be zero");
    require(_oracles != address(0), "Pool: oracles address cannot be zero");
    require(_validatorRegistration != address(0), "Pool: validatorRegistration address cannot be zero");
    require(_validators != address(0), "Pool: validators address cannot be zero");
    require(_withdrawalCredentials != bytes32(0), "Pool: withdrawalCredentials cannot be zero");


Remove the parameter _withdrawalCredentials from intialize function

Appendix 1 - Files in Scope

This audit covered the following files:

File SHA-1 hash
contracts/AdminUpgradeableProxy.sol 6325b086018baf4323a49458ed2107c409c0ec2a
contracts/Oracles.sol c2f5b8bd673f6f40e5b6978c90d944123266018d
contracts/merkles/MerkleDistributor.sol eed531d2ca2ce7dcd8328d038e72732569aa6768
contracts/pool/FeesEscrow.sol 2b9472c2e5b4062ade13975fb507a40f3b53ebae
contracts/pool/Pool.sol 44df2cf5e2fcd88e8abe9d523a210dbe1280b691
contracts/pool/PoolValidators.sol 38af87367ee8e59e11e16cd59797819e1f2a1b1e
contracts/tokens/Rewards.sol 3c1b5a01c23ab161c1d55bf3323a2c594e592eb6
contracts/tokens/StakedLyxToken.sol d411f979be4b9df174742b93be2d33982c3da4f0

Appendix 2 - Disclosure

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