Vulnerabilities

ERC4626 Inflation Attack

An ERC4626 inflation attack manipulates an empty or low-supply vault's asset-to-share rate so a victim receives too few shares.

The attacker makes vault shares expensive before the victim deposits, so the victim gets rounded down.

ERC4626 Inflation Attack Explained in Detail

An ERC4626 inflation attack targets vault share math when supply is empty or tiny. A common shape is: attacker deposits a dust amount, donates assets directly to the vault, then a victim deposits and receives zero or too few shares because of rounding.

The victim's assets increase the vault value, but the attacker owns most or all shares.

{
    "preset": "flow",
    "autoplaySecs": 5.0,
    "edges": [
        {"idx": 0, "stepReveal": 0},
        {"idx": 1, "stepReveal": 1},
        {"idx": 2, "stepReveal": 2},
        {"idx": 3, "stepReveal": 3, "accent": true}
    ],
    "steps": [
        {"title": "Step 1 - Attacker gets first shares", "desc": "The vault starts with tiny supply, so the first shares control the exchange rate.", "activeNodes": ["attacker", "dust"], "activeEdges": [0], "tone": "warning", "navLabel": "Step 1 - Attacker gets first shares"},
        {"title": "Step 2 - A direct donation raises assets", "desc": "Assets increase without minting new shares, making each existing share look expensive.", "activeNodes": ["dust", "donation"], "activeEdges": [1], "tone": "danger", "navLabel": "Step 2 - A direct donation raises assets"},
        {"title": "Step 3 - Victim deposits into skewed math", "desc": "The victim deposits after the attacker has changed the asset-to-share rate.", "activeNodes": ["donation", "victim"], "activeEdges": [2], "tone": "danger", "navLabel": "Step 3 - Victim deposits into skewed math"},
        {"title": "Step 4 - Rounding gives too few shares", "desc": "Integer rounding can mint zero or too few shares for the victim.", "activeNodes": ["victim", "rounding"], "activeEdges": [3], "tone": "danger", "navLabel": "Step 4 - Rounding gives too few shares"},
        {"title": "Audit lesson", "desc": "Low-supply vaults need mitigations such as virtual shares, seeded liquidity, or minimum-share checks.", "activeNodes": ["donation", "rounding"], "activeEdges": [3], "tone": "info", "navLabel": "Audit lesson"}
    ]
}
Exploit Flow

How the share price gets inflated

Step through the empty-vault attack: a tiny first deposit plus a direct donation makes the victim receive too few shares.

AAttackerStarts vault
First mover
The attacker gets the first shares while supply is tiny.
Step 1
1Deposit 1Tiny shares
Dust deposit
A tiny deposit creates the initial share supply.
Step 2
+DonateAssets rise
Direct donation
Assets enter the vault without minting proportional shares.
Step 3
VVictimDeposits next
Victim deposit
The victim deposits after the exchange rate has been skewed.
Step 4
00 SharesRounded down
Rounding loss
The victim receives zero or too few shares, while the attacker owns the share supply.
Step 5

Smart contract example

attacker deposits 1 -> attacker donates 100 -> victim deposits 100 -> victim receives 0 shares

The exact numbers depend on the vault's conversion and rounding logic.

ERC4626 Inflation Attack in Auditing

ERC4626 vaults are often integrated as yield sources, collateral, and strategy tokens. Inflation bugs can steal first deposits or make small deposits unsafe.

Auditors review low-supply share math before treating the vault as safe.

Red flags in code

  • Empty vault has no virtual shares, virtual assets, or seeded liquidity.

  • totalAssets() uses raw token balance without internal accounting.

  • Deposits lack minimum-share protection.

  • Direct donations change the share price.

  • Tests skip first-depositor and dust-deposit cases.

How to test or review it

  • Simulate attacker dust deposit, donation, and victim deposit.

  • Check previewDeposit against actual minted shares.

  • Fuzz low supply, low assets, and rounding boundaries.

  • Test virtual-share or dead-share mitigations.

  • Confirm routers or callers enforce minimum shares when needed.

ERC-4626 Vaults

ERC-4626 is the tokenized vault standard where users deposit an asset and receive vault shares that represent a claim on the vault's assets.

Donation Attack

A donation attack manipulates protocol accounting by transferring tokens directly to a contract without using the intended deposit path.

Rounding Error

A rounding error is the difference between the mathematically exact result and the integer-rounded result returned by smart contract math.

Practice this in real audit scenarios

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Sources