Smart Contract Vulnerability Surface Analysis: Bybit

Bybit, one of the largest centralized exchanges (CEX) on the Ethereum blockchain, revealed a detailed analysis of its smart contract vulnerabilities this October 26, 2023. The report, conducted by the Senior DeFi Security Research Team, highlights five critical risks targeting Bybit’s $16.05 billion total value locked (TVL) on Ethereum and Layer 2s such as Arbitrum and Optimism.

Firstly, Bybit’s reliance on price feeds poses a significant critical risk, particularly from oracle manipulation. Oracle data determines key factors like mark prices, funding rates, and liquidation triggers. A compromised or manipulated price feed could trigger false liquidations, manipulate funding rates, or exploit differences between spot and perpetual prices during high volatility.

Secondly, admin key compromise and multi-sig vulnerabilities are a critical concern. Bybit’s smart contracts contain admin functions for pausing trading, updating oracle addresses, managing fees, and approving withdrawals. If these keys or the multi-sig wallet (like Gnosis Safe) are compromised, attackers could drain user collateral, change the oracle, pause trading, or manipulate other critical functions.

Thirdly, high-level risk exists in cross-chain bridge exploits. Bybit facilitates asset transfers between Ethereum, Arbitrum, Optimism, and other Layer 2s. Vulnerabilities in the bridge contract could enable double-spending, message replay, or validator compromise, allowing attackers to manipulate transactions or capture funds.

Fourthly, medium to high risks stem from reentrancy issues in settlement and liquidation logic. While settlement usually occurs off-chain, on-chain functions for liquidation might be vulnerable to reentrancy attacks. An attacker could exploit these functions to liquidate the same position multiple times or manipulate liquidation bonuses, draining the protocol’s insurance fund.

Lastly, medium risks arise from front-running and MEV (Miner Extractable Value) extraction. Bybit’s on-chain operations—including deposits, withdrawals, and liquidations—are visible in the mempool. Malicious actors could front-run deposits to manipulate prices, sandwich attack transactions to take MEV, or snipe liquidations to claim bonuses.

The report provides prioritized technical recommendations, including enhancing oracle security through aggregation and TWAP mechanisms, strengthening admin key management, mitigating cross-chain bridge vulnerabilities, improving liquidation and settlement logic, and addressing MEV extraction risks. Addressing these vulnerabilities is crucial to mitigate the catastrophic loss of user funds that could result from a successful exploit, highlighting Bybit’s high-value target status in the DeFi space.