Auditing Compound Protocol

[jamico]

Since the launch of governance last summer, the Compound community has shepherded the protocol through a period of remarkable growth. Under the community’s watch the protocol has seen significant expansion across every relevant metric, from loans outstanding to TVL to net revenue. This period also witnessed a number of community-led upgrades to the core protocol itself, including the Governor Bravo migration and the Oracle Improvement, among others. These not only represent meaningful upgrades to the system, they also speak to the quality of the Compound community and its ability to shepherd the protocol into the future.

Like any community-led project though, growing pains are to be expected. To leverage the power of open-source development is to accept certain new risk tradeoffs, and Compound is no different. The protocol has benefited greatly from the open-source model, drawing on a great deal of third-party developer talent and resources to upgrade the protocol and extend its core capabilities. At the same time, the very properties that make this model so compelling (openness, permissionless, etc) can also introduce new risk vectors when not properly managed. We saw this recently with Proposal 62.

But the takeaway from 62 should not be a retreat from the open-source model that has otherwise served Compound so well. It should instead be an opportunity to give the community the resources and support it needs to contribute to the protocol in a safe and responsible manner. Doing so will allow Compound to continue to harness the benefits of community development while mitigating the accompanying risks.

This brings us to the OpenZeppelin proposal, which we think is positioned to do exactly that. OpenZeppelin not only has an industry-leading reputation among blockchain security firms, it also has extensive experience working on the Compound protocol itself, including 10+ audits as well as its work on the OpenZeppelin Governor contracts. Enlisting a firm of this caliber will give community developers the support they need to do their job effectively, while also ensuring the protocol remains safe.

While the proposal does come with a high nominal price tag, it ultimately seems reasonable given the quality of OpenZeppelin’s offering, the demand for similar services across the industry, and the need to safeguard Compound following Proposal 62. And furthermore the short contract term (and quarterly repricing options) allow the community to assess OpenZeppelin’s performance in relatively short-order and determine whether it’s worthwhile to renew.

We appreciate OpenZeppelin’s hard work in crafting a thoughtful and detailed proposal and also incorporating feedback from the community. In terms of next steps, we defer to the community’s view on timing/process, though at this point we are supportive of this proposal moving towards a formal vote. We welcome any additional thoughts or feedback that the community might have.

Jeff Amico
a16z

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Disclosure: a16z is an investor in Forta, a blockchain security platform that was recently spun out of OpenZeppelin. a16z is not an investor in OpenZeppelin.

[jared]

It’s great to see this proposal from OpenZeppelin, who has generally been a great partner to Compound Labs over the last few years. The scope of the proposal is quite large however, and includes services which Compound Labs has never used before, and therefore cannot attest to the value of. Audits have never been a silver bullet, and never will be, so personally I think it’s important to think about and balance all of the quality assurance resources we have available. This should probably include things like formal verification and investment into the tools developers actually use to build and test the protocol themselves.

While the price tag seems extremely high, I would like to clarify what exactly would be covered by the continuous security audits? Would this include all new contracts developed by the community and adopted by governance?

Logistically speaking, when can a proposal be submitted for audit? If we are truly just monitoring proposals that have been made on-chain, that seems not nearly enough time for an audit and a response to the audit. In that case, what would the actual process of scheduling an audit look like? What sort of lead times should the community expect?

I think it’s important we understand the answers to these questions in order to understand the offering. Thanks to everyone on this thread!

[OZSecure]

@jared thanks for joining the discussion!

I have tried to break out each of your questions with answers below:

What about Formal Verification (FV)?

As you may be aware we are trying to use formal verification on critical components of the OpenZeppelin Contracts Library. We see FV as helping to lower the overall risk footprint but FV also has its clear limitations. Therefore, we see FV as a component of an overall holistic security process that must include coding best practices, manual auditing, education, threat monitoring and bug bounties (our internal process encompasses all of these). Formal verification is only as good as the initial description of the desired properties of critical elements of the protocol, which is why manual auditing is still a critical step in the overall program. We have relationship with Certora and are fans of the progress their technology is making but would be happy to work with whichever formal verification vendor Compound chooses and implements. Security as you indicated is not about looking for a “silver bullet” but layering in services, processes, and technologies to lower overall risk exposure. We would be happy to include additional work and cooperation with Compound’s desired FV vendor as part of this existing proposal. Our PSO and auditors can aid in ensuring that the desired properties of the protocol are described properly from a security perspective, so the FV vendor can write the rules effectively for implementation.

Would this include all new contracts developed by the community and adopted by governance?

Yes, that's the expectation. Any substantial changes to the Compound protocol would be covered by an OpenZeppelin audit. Audit times would be set aside in advance for upcoming proposals and protocol changes. We would commit to auditing all community-supported proposals on a timely basis. That said, not all proposals are created equal; some will be high priority for the protocol and some will be low priority. We expect to work with the community on helping us separate the signal from the noise

Logistically speaking, when can a proposal be submitted for audit? If we are truly just monitoring proposals that have been made on-chain, that seems not nearly enough time for an audit and a response to the audit. In that case, what would the actual process of scheduling an audit look like? What sort of lead times should the community expect?

As part of the Advisory Solution, the first task of the OpenZeppelin Protocol Security Officer (PSO) is to propose to the community a clear approach and process as to how security audits and security related issues would be incorporated into the proposal lifecycle. From our perspective, security audits should be a prerequisite for submitting a governance proposal that makes changes to the protocol.

Once a potential community proposal has initial support and begins development, the submitter will work with the PSO and dedicated OpenZeppelin auditors to ensure the agreed defined process is followed, and everything is ready for code completion in the most efficient way possible.

The initial proposal is considered code complete with a frozen commit, it would then be submitted to the OpenZeppelin Audit team for audit.

Based on similar audits (e.g. Celo governance upgrades) our initial estimates suggest 2 weeks for auditing minor protocol proposals although exact time required depends on the lines of code and complexity. This includes 1 week for the audit and another week for reviewing fixes although this timing also depends on how quickly the proposal submitter responds with fixes. Once the final report is finalized and shared with the Community, the proposal will be able to move forward with the governance process starting with the two day review. Good communication between the OpenZeppelin team, the submitter, and the community will be critical and will be managed by the PSO. Please note that we have been conservative in these estimates, it's our assumption that we can improve the timeliness based on improved processes, developer education and good community communication.

Before auditing new proposals it's our expectation that we will do a full protocol audit, starting out with existing critical components of the Compound protocol which should include the governance contract, Comptroller, and other components typically involved in governance proposals. This initial audit will ensure that OpenZeppelin can take full ownership for the security for the entire protocol and give our auditors the necessary context to review new protocol changes.This would take approximately 7-9 weeks based on our knowledge of the existing Compound code base, we would begin this audit as soon as possible upon acceptance of this proposal.

I have attached an example to illustrate the process:

Proposal 62 would have consisted of the following steps:

1. Late July - Forum post responding to RFP16 is made and development begins on the proposal changes. The PSO is made aware of the proposal in progress and works with the submitter to prepare for an audit in accordance with community guidelines.
2. September 13th - Proposal code is completed as a Pull Request with a frozen commit one week prior to audit start
3. September 20th - Audit begins the week of Sep 20th and ends that week on Sep 24th. An audit report is delivered to the submitter no later than Sep 27th.
4. September 27th - Submitter addresses bugs found and submits fixes to the audit team to review. The audit team reviews the fixes and updates the report.
5. October 4th - The report is finalized and shared with the Community. The proposal is able to move forward with the governance process starting with the two day review.

I hope this clarifies our willingness to support FV as a component of an overall holistic security process, and the way we are thinking about integrating our offering into the Compound Community governance process.

Steve Gant

OpenZeppelin

[OZSecure]

On behalf of the OpenZeppelin team, I want to thank everyone for bringing their thoughts and expertise to a constructive and open exchange about the Compound Security Solutions Proposal over the past two weeks.

Overall, Compound stakeholders and community members agree that a set of comprehensive security solutions are essential to the Compound DAO’s overall security and continued strong reputation. To this end, this week we will submit only the retainer fee portion of the OpenZeppelin Proposal for a vote. This will allow us to move forward on this important project and work with the Compound DAO on immediate governance and security matters.

Separately, in March 2022 we will submit the performance fee for a vote, which will allow time for further discussion while moving forward with this important matter. We believe the foundation of our initial work will demonstrate the merit of our proposal’s overall approach and look forward to the prospect of working with Compound!

[dvf]

This sounds workable then, @OZSecure.

I am in favor of doing it.

[arr00]

Why is does OpenZeppelin believe that using the built in contributor comp speed is a good idea? It is not the way to go about this proposal at all. The community should reject any proposal that creates indefinite payments to anyone.

[dguido]

Hey all,

Trail of Bits has a proposed solution in the works for the issue that Larry Sukernik described. We are aware that there’s an active vote on Open Zeppelin’s proposal. Please vote “no” on this governance proposal if you’d like to consider how Trail of Bits would provide these services before deciding on a vendor.

In advance of a finished proposal from us, I’d like to lay out why I think Trail of Bits could be the right choice for this job, a few key ways that our proposal will differ from Open Zeppelin, and why I think the performance fee may not provide the intended incentives.

Introducing Trail of Bits

Trail of Bits has worked extensively with Compound over nearly 1,000 hours of security review through four focused engagements covering their governance, core protocol, and internal security procedures. Many firms in DeFi, including MakerDAO, Balancer, Uniswap, and Rocketpool trust our expertise to help secure their code, and you can find many more in our Publications repository. We’ve succeeded in finding vulnerabilities in highly verified systems and providing the best solutions regardless of whether we invented them. We’re relentless about raising the baseline in the communities we work, and have developed and made freely available some of the most-used security tools, reference guides, and security research in the industry.

Trail of Bits is differentiated from other firms by our diversity of experience and expertise. We work on securing software wherever the risks are high in the technology, defense, and finance industries and employ a wide-ranging team of experts in programming language theory, cryptography, cloud-native software, and low-level exploitation to do so. Roughly one-third of our firm works on fundamental research in their field through long-term contracts with DARPA on automated program analysis, zero-knowledge proofs, and software verification. Access to these competency areas improves our ability to consult with all of our clients, and particularly on blockchain systems.

Trail of Bits proposal preview

At our core, we’ll be proposing many of the same services as Open Zeppelin. Therefore, I’ll keep these sections brief by focusing on the key differences in our approach.

Security review of governance proposals

Trail of Bits believes this is the most important service provided by the proposal. We plan to review all governance proposals, including parameter changes, new token integrations, and more extensive code changes. For each proposal, we will fully describe any identified security issues, including scenarios for abusing the issue and specific recommendations to address it.

• Reviewing the security of a proposal after voting has already begun is too late. We will begin reviewing new proposals after it becomes clear they are seriously considered by users on the Compound Discourse.
• Proposal authors will receive a one-on-one counseling session. We will host a video call with the author to understand their goals and provide immediate feedback. These video conversations will ensure information is effectively shared.
• We will review and report any identified security issues. These issues will take the standard form of a description of the issue, a scenario for abusing it, and a recommendation for addressing it. We will work with proposal authors to validate any fixes that result from these reports.
• We will contribute a “Security Considerations” section to every proposal. The absence of specific security issues does not ensure the safety of a proposal. We will contribute a standardized section to reviewed proposals that informs developers and users of limitations, risks, monitoring guidance, or other considerations.
• We will help define security properties for the proposal. Human review is necessary but insufficient to provide for the security of DeFi systems. We will work with the authors to provide reasonable security invariants alongside the proposal.
• We will provide our analysis directly to the community. Prior to a vote on any governance issue, we will host a public community call and walk attendees through any specific issues we discovered and the documented Security Considerations.

Community training and continuous improvement

Trail of Bits will develop scaffolding for proposal authors to write safer proposals and provide continuous training and guidance to improve the quality of proposals over time. In particular, our approach takes after the Security TAG process for improving the CNCF security baseline by engaging directly with developers.

• We will iterate on public guidance for developing secure proposals. This will consist of a template repository with testing and verifications tools pre-configured for different proposal types, prompts to elicit a self-assessment of the proposal’s security by its authors, and a public walkthrough for navigating the security review process with Trail of Bits.
• We will host bi-weekly workshop sessions or “office hours” with developers. These sessions will cover testing and verification tools, review previous DeFi incidents, and deeply investigate common areas of risk. As appropriate, these will be recorded and made available for community use.
• We will publish a minimum-security checklist for new proposals. Specific to Compound, we will describe the minimum viable due diligence steps we believe are required to make a reasonable governance proposal. Like our Token Integration Checklist, this checklist will include specific, actionable steps that authors can complete on their own, before circulating a proposal.

Security intelligence

Trail of Bits takes an expansive, intelligence-driven view of security monitoring. On-chain monitoring is important, however, if you are finding issues at the time that transactions are being processed then you are typically too late. Furthermore, on-chain monitoring tools have substantial limitations regarding the types of issues they can detect. Like human-only code review, on-chain monitoring is necessary but not sufficient to ensure safety in DeFi.

We will evaluate and recommend an on-chain monitoring vendor. We will evaluate on-chain monitoring vendors (including Forta), recommend the selection of one, and assist in configuring it appropriately. Furthermore, the code invariants developed through security review will be regularly provided to the owner of this system. The quality of your on-chain monitoring is directly dependent on the quality of your system’s specifications.

We will provide security intelligence and facilitate community engagement. We will facilitate community development of new attacks against Compound. Rather than wait to report a fully-developed attack to Compound, Trail of Bits will be available to co-investigate unproven potential vulnerabilities with reporters and prepare tailored remediations and fixes to Compound alongside their reports. With our earlier involvement, we will shorten the window of exposure for new attacks reported against Compound.

Pricing structure

Fees to Trail of Bits will be split into three discrete categories:

1. Quarterly retainer. Trail of Bits will be paid the equivalent of $1 million USD in COMP every quarter for one year to provide the baseline services.
2. Trail of Bits will be eligible for bounty awards in cases where it co-investigates and co-reports issues to Compound, outside of the retainer fees.
3. Performance fee. The motivations behind this fee are positive, however, the design as a binary all or nothing with factors outside the auditor’s control are not.

To be clear, we don’t have a perfectly designed performance fee incentive to propose at this time and desire additional time to work on this aspect of the proposal specifically. We’re eager to work with the community on a model that benefits everyone.

Finally, we are happy to cut the bounty co-investigation piece from this proposal and incorporate it into the Bug Bounty for Compound Proposals discussion. I included a discussion of it solely due to the mention of security monitoring by Open Zeppelin and because I see security intelligence as an inseparable part of security monitoring.

We’re very excited to hear your thoughts!

[OZSecure]

While we welcome competition, ToB’s last minute proposal -- that by their own admission is nearly identical to ours -- is undifferentiated and lacks a solution for threat monitoring and security intelligence. ToB had several weeks to respond but chose not to, making it clear that Compound’s security is not a priority for them. Delays in moving forward with security solutions, regardless of with whom, compromise the security of high value projects (DAOs or others), which must make a decision to act, not to delay.

In the 6-8 weeks since the Proposal 62 event, we have actively and publicly engaged the community and stakeholders to determine the most effective method of providing security given OpenZeppelin’s current and future capabilities. (Note, the proposal in question was in development within OpenZeppelin for our DAO strategy and we believed that our long standing Compound relationship and the incident merited a custom, early version of it given our long history of working with Compound).

A counterproposal from another security firm, particularly a proposal with significant alternatives, rather than a copy with small tactical differences, would have been valuable had it been brought forward in a timely fashion. Then the community could have determined the best option -- comparing all proposals with the appropriate time and attention it deserves. However, given security has urgency, we strongly advise the vote continue as planned and invite other vendors with valuable, original approaches to offer a counter proposal next year when the solution comes up for a vote again.

Given we are all working together to shape the future of B2DAO relationships and how engagements like this take off, we have no doubt that we and the community will have the opportunity to improve and iterate our solutions in the open and in competition with other solution providers in the space. OpenZeppelin is confident in our ability to deliver best-in-class security solutions, as our clients can attest (https://www.comp.xyz/t/auditing-compound-protocol/2543/4).

We ask that those who are genuinely interested in Compounds Protocol Security vote for our current proposal. (https://compound.finance/governance/proposals/70)

[dguido]

I certainly understand the desire to swiftly plan a path forward but urgency on this issue is driven by new governance proposals, of which I only see a parameter change right now. For the record, the first we heard there was any activity on this topic was October 26th. It was a lot to wrap our heads around and deserved some time thinking about an approach rather than diving in with recommendations. I was surprised to see a vote so quickly given the magnitude of this effort!

At the end of the day, we’re all offering software assurance services so of course a lot of this is going to look the same. If I had to characterize the differences, the Trail of Bits proposal focuses most of its effort on a) finding and reducing risk in governance proposals, and b) increasing security by reducing the cost of control (e.g., with templates, checklists, assessment guides, specification development, and other systems that continuously reinforce themselves). I think we were much more specific on that front. On the other hand, the OZ proposal contemplates a broader set of activities, like security training and threat detection, that apply only indirectly to the core issue of merging insecure or unsafe proposals. E.g., I’m less sure how to take a Q&A channel staffed with OZ employees to the bank.

Reading between the lines, this seems like a similar take that Jared had earlier in the thread:

The scope of the proposal is quite large … and includes services which Compound Labs has never used before, and therefore cannot attest to the value of. Audits have never been a silver bullet, and never will be, so personally I think it’s important to think about and balance all of the quality assurance resources we have available. This should probably include things like formal verification and investment into the tools developers actually use to build and test the protocol themselves.

In my opinion, on-chain monitoring in particular, while possibly valuable, probably should not get bundled as a must-purchase alongside the auditing service for governance proposals. These types of systems are an active field of research (see also, flashbots), may apply to less attacks than expected, or may have undesirable performance impacts or other costs. I’d want to study them further to understand their value and limitations.

[OZSecure]

If you want Compound to be protected by OpenZeppelin as of Dec 1st, then vote Yes.

If you believe the question of Compound’s security can wait for further deliberation at this time and be addressed at an unknown future date, then vote No.

The facts are that we had a timely and immediate response to the needs of Compound and the Compound community. We did not show up opportunistically, or late, focused solely on missing out on a business opportunity. Our priority at OpenZeppelin is and has been to protect the open economy, including DAOs and communities like Compound.

We are past the stage of deciding whether Compound needs a security partner. There is no formal RFP process for DAO security solutions today, based on feedback and responses, it's clear that we not only conducted a fair and open process, but have set the standard for what a Security Solution should look like.

Delaying a decision to an unknown future date and vendor could come at the cost of Compound’s long-term security preparedness.

Thank you for your consideration,

[jamico]

We really appreciate the hard work of both OpenZeppelin and Trail of Bits in bringing forward their respective proposals. To receive competing bids of this quality speaks to the importance of the task at hand. It’s now incumbent on the community to do its part and evaluate these proposals fairly and in a timely manner.

As we wrote earlier in this thread, we supported OZ’s original proposal, and delegated to their CAP to help kick off a live vote. However, we chose to abstain from voting on Proposal 70 once we saw Trail of Bits submit a competing bid. We did so to ensure that ToB had a fair chance to pitch its proposal and be heard by the community. While this will extend the timeline, we think a competitive process is in the best interest of the protocol, and will ultimately serve Compound well in the end.

To that end, we would support extending the process for another 1-2 weeks. This would allow the community to hear more about ToB’s proposal, to evaluate the two proposals side-by-side, and to answer any remaining questions before making a decision. Following this period, we would suggest that the two proposals be introduced as simultaneous governance votes (or something similar), with the token holders ultimately deciding which one they prefer.

We think a simple approach along these lines would give ToB an opportunity to pitch its proposal, while also setting a firm deadline to ensure the process does not drag out indefinitely. This latter point is important both for the security of the Compound protocol and to ensure we remain respectful of both vendors’ time and effort.

We welcome any thoughts or ideas that the community might have, and look forward to identifying a process that works for all parties.

Jeff Amico
a16z

[OZSecure]

Thanks Jeff!

We strongly believe that OpenZeppelin has the best vision, team, and Security Solutions for Compound. We also know that we are trailblazing a new process here of how the DAO will ensure security.

On November 3rd, OpenZeppelin was invited to submit a proposal and has led a well paced, open, and transparent process. But we accept that this process will now be extended.

Given the significant time, effort and leadership OpenZeppelin has shown here, we simply ask that you and other community members come up with a fair process with a clear timeline, and decision-making criteria.

We would request that a vote start NLT 1200 PST, Dec 6, 2021. Secondly, whatever vote date is selected, we would kindly ask that the proposals be locked one week before the vote, so we can revise our proposal one last time, given that our proposal has been open for scrutiny and copying since we proposed it on Nov 4, 2021.

We appreciate that this is a new process for Compound - and DAOs in general - and look forward to continuing to work with you all in breaking new ground!

[allthecolors]

I appreciate the write-ups from @OZSecure (OpenZeppelin) and @dguido (Trail of Bits). These teams’ work with Compound Labs on the protocol’s core contracts, especially pre-governance, was invaluable for the bootstrapping of the protocol. As a community member and user, I deeply appreciate your past work for Compound and your broader efforts as good actors in the smart contract security space.

To me, the tenor and character of this current thread feel out of step with the bona fides of OZ’s and ToB’s prior work with Compound Labs. Let me try to lay out the key discrepancies I’m seeing. I am hoping it could help us think through the origins of the current tension; increase community buy-in for @jamico’s suggestion on a path forward; and hopefully identify some ways to circumvent such tensions in future efforts as stewards of the protocol.

Conflicts of interest: I appreciate @sukernik’s transparency at the top of this thread in explaining how the proposal from OZ came to us. That said, declaration of a conflict of interest doesn’t absolve us of the need to agree on how to work around it. In this case, it seems likely that there was some degree of information or timing asymmetry between the vendor with whom @sukernik has a business relationship (OZ) and the vendor with whom he presumably does not (ToB).

Now, we have one vendor (OZ) that has been, at times in this thread, projecting a sense of entitlement to an up-down vote as a sole-source provider, and another vendor (ToB) stuck playing catch-up through no fault of their own while trying to manage the optics of the awkward situation that we have placed them in.

I have to say, I am a bit baffled by the number and variety of high-pressure sales tactics employed by @OZSecure throughout this thread, from aggressive up-selling relative to @sukernik’s initial outreach, to intentionally promoting an atmosphere of urgency, to rather bizarrely accusing ToB of copying aspects of OZ’s proposal that any reasonable vendor would include. In my eyes, these tactics are incongruous with, and damaging to, OZ’s good reputation.

I see two take-aways here, one for community members taking on new initiatives, and one for vendors proposing fee-based services to the protocol:

• Community members: Let’s please at least start a thread here on the forums before engaging in direct outreach to potential vendors for any new initiatives that could possibly involve a distribution of COMP, especially if there are known conflicts of interest involved. Otherwise, vendors like ToB (and others who might be well-qualified but whom we might not personally know) have every reason to question the integrity of the process.

• Service providers: Especially in cases where a conflict of interest may exist, prospective service providers should be careful to keep proposals clearly in-scope of the request. Here, the request was audit review of new governance proposals prior to on-chain execution; what OZ proposed in response is a much more elaborate engagement, some of which is necessary to deliver the core service, some of which is almost certainly not.
  For example, I love the idea of an experienced auditing firm providing educational materials for community members seeking to improve the protocol, and I would likely be a user of this resource if it existed. Furthermore, OZ’s suite of public contract templates offer ample evidence that they would likely do a fantastic job. However, it is related, but quite far removed from, the core aims of this security audit request and, at least in my view, should be considered as a separate proposal.

Cost model: I’m not qualified to objectively assess how reasonable the costs are, but I will state as an outsider to the security audit industry that they seem absurdly, even comically high to me (like, by about one order of magnitude). While I acknowledge that the community is likely to support paying a premium relative to reasonable market rates, any additional supporting evidence OZ can provide to justify the cost structure relative to industry standards would be helpful here.

I also agree with community members who question the cost structure of OZ’s proposal and its performance fee: I do not consider a performance fee model to be appropriate for this work. If the service rendered is to secure the protocol, why should the service provider get extra cookies every quarter the protocol is not exploited? Compound does not need to offer an extra incentive here. The service provider’s motivation to do their work well should be to score the next security agreement with the protocol, not to earn extra compensation for services already rendered.

Finally, I agree with @arr00 that compensation for this work should not be streamed to the vendor. It makes more sense to me that it be paid out periodically (perhaps quarterly for one year, then annually) with a new proposal to authorize the payment for each following period.

The question of payment schedules leads to an important final follow-up question: how can the community secure auditing services beyond the runway of the current COMP distribution schedule, which is only a few years iirc? While this question goes beyond the core focus of the audit proposals, it is worth discussing in this context as we continue what I consider to be the most important discussion we’re having: how to adjust COMP distribution for the health, security, and sustainability of the protocol.

[JacobPPhillips]

@allthecolors – as always, your commentary is extremely thoughtful. I’m sure @sukernik will explain, but OZ and TOB were contacted around the same time — OZ just happened to move a lot quicker on this. And the process run here seemed to give ample time for other auditors to throw in a competing proposal. OZ’s request for the other auditors & the COMP community to move quickly on this seems reasonable given the timeline they’ve worked with so far (though I think the Dec 6th deadline is too tight, given the holidays).

This idea had been discussed by a number of folks in the community long before Larry finally took the initiative to have the conversations and make this happen. There’s an intricate web of potential conflicts of interests (some obvious, some less obvious) for just about any leader in the crypto community, so it’s not surprising to see this here. I think the best we can do is just be transparent about potential COI’s. In some ways, Larry’s close relationship with OZ may have been valuable in helping mobilize OZ to make the prop it did (and perhaps he should even be compensated for this!). COIs can be dangerous if they lead to proposals that are misaligned with the long-term health of COMP, but in this situation, COMP would be very lucky to have OZ or TOB on our side, both are excellent options.

The [scope of the proposal] and [cost] concerns are also very valid. I think the service providers should be free to propose whatever they want… if their proposals are off the mark from what the COMP community would like, we should negotiate the services/terms. This highlights a key problem — it’s really hard to negotiate the right deals with so many voices on an open forum, especially when considering multiple proposals. (h/t @sukernik who planned to bring up this exact issue on the community call).

Perhaps forming a pod (committee) of people with expertise in structuring and negotiating these types of deals and giving them the autonomy to negotiate off-forum with OZ, TOB, and others to get a deal done would be a better way to accomplish the objective here.

(p.s. Happy Thanksgiving to anyone celebrating!)

[dvf]

I’m the security guy for OUSD. Currently we are the #8 holder of cUSDT and the #10 holder of cUSDC, and growing rapidly - yesterday 29 million stables were deposited into OUSD. I don’t want something happening to that money. My goal here is that Compound not lose a pile of money suddenly.

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The Compound codebase needs a first tier audit. It is madness to continue the current ad-hoc deployment of new code changes. This is one of the biggest protocols in Defi. It is vital that each code change pass a serious code review.

As far as I can tell, everyone here is in agreement on the need for an audit, and the need for code change reviews.

Beyond that, Compound’s single collateral pool design means that a security failure of any listed coin could empty all the liquidity of all Compound lending pools. Both coins that destroyed CREAM, and the coin that could have destroyed AAVE, would have wrecked Compound had they been listed here. Compound governance’s strong bias for not listing coins has probably saved the protocol.

A listed coin is a much a part of the security of Compound as the Compound codebase itself. Listing a new coin requires a high bar of security and economic analysis. It’s an integral part of the security of Compound.

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Individuals making code contributions can’t be expected to negotiate, schedule, and pre-fund an audit of their own code that then may or may not even be approved for payment. Even for good teams with existing auditor relationships, it is difficult to quickly get an auditor lined up to review code changes. If we want Compound to have any development velocity, there needs to be a friction free way of getting excellent code reviews on all changes that is not up to the individual contributor. Both of these proposals provide that, and this is good.

This capability is not cheap no matter how it is done, and that is okay.

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One long term alternative is for Compound to build out their own internal security team to handle the majority of the security work.

The proposals from OZ, Trail of Bits, and Certora all assume that Compound has an internal development/security team. This isn’t the case as far as I can tell from forum lurking. Compound development currently seems to be individuals making ad-hoc proposals, and no one really checking them, outside sometimes getting a random external audit.

Four million dollars, even in this market, does buy a substantial amount of developer/security time. The ideal mix of internal and and external from both a cost and security perspective probably isn’t being 100% external.

But while the long term solution may be different, it is urgent to put Compound on a better security footing. I’d run a version of one of these proposals for a year and use that time to plan and build out the longer term solution.

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It would be good for external security proposals to reflect the current Compound security staffing, rather than that of a typical project.

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I am strongly against any form of “performance fee”. That seems like it would reward gaming the system, more than just doing the job and getting paid / earning the reputation. I think performance fees have has strong downsides. It’s a distraction for everyone involved. The auditors don’t want to be the ones that signed off on the code change that got one of the largest defi projects hacked. That’s enough.

Unless someone has an epic, genius idea, let’s just nix anything to do with performance bonuses.

If an auditor is willing to do so, denominating the payment amount in COMP would be an alignment that would be good, and easy to do. If not, I understand.

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I don’t have any friendships with anyone at either OZ or Trail of Bits. I’ve had audits by both. Both were professional, competent, and reasonably through.

I preferred the OZ experience, but I know other people who have preferred working with Trail of Bits. I’m assuming your experience and strength of audit is based on which individuals are assigned to your audit team.

In either case, either company is first tier and capable of providing a good team.

The two proposals are currently at the same price. Of the two current proposals, the OZ proposal offers more, and I lean that way.

Both proposals would make a marked security improvement over the current situation. In my opinion, given the funds in Compound, both bring more value than they cost.

Both the OZ proposal and the Trail of Bits are obviously overpriced, and also contain low value filler to pad the dollar value of the proposal.

Because these proposals are currently overpriced there’s a lot of weird dynamics going on in this thread from both parties, as they try to get the cash cow, while not getting into a bidding war and driving the price down.

How to properly negotiate in this open forum is beyond the scope of what I’m willing to think about on my Thanksgiving day off.

Compound needs an audit, needs a system for auditing future changes, and needs it now. We should have a deadline, and go for it.

Happy Thanksgiving!

[sukernik]

Plenty of things to respond to here; it may be a good idea to do so before the post-Thanksgiving dinner food coma.

First of all, I’d like to thank @allthecolors for his pragmatic reply. It’s always a bit difficult to communicate all of the information one has on the forums: private conversations happen of course, and relaying every bit of detail that happens in private can be cumbersome. As a result, many forum posts are (rightfully) questioned by the outside observer.

Now to address @allthecolors’ comment directly. A sizable chunk of my net worth is in COMP, so when the Proposal 62 exploit happened, I was quite frustrated that a simple and avoidable process failure wasn’t being rectified. In my mind, the fastest fix was to get a top-tier auditor to review every single governance proposal for Compound. I ran the idea by a few folks in the community, and after they responded favorably to the idea, I decided to reach out to the audit firms. When you need help with something, you naturally turn to the folks you’re closest with first. I had pre-existing relationships with the OZ folks, so I reached out to them first. A few days after speaking with OZ, I reached out to Trail of Bits, ConsenSys Diligence, and Sigma Prime (it took some time for me to get connected with them). In each case, I told each of them the same information: Compound protocol needs an auditor, you should bid for the work, and I personally have a personal and economic relationship with OZ. Conflicts of interest are unavoidable; as long we’re transparent about them, we should be able to achieve fair and favorable outcomes.

I’d also like to share some thoughts on the process by which Compound protocol chooses an auditor. Clearly, this whole shebang is a first for Compound: we’ve never had to deal with multiple vendors bidding for the same work, which means we’ve never had to establish a process for choosing the winner. Is this an annoyance to vendors looking to work with Compound? Absolutely. Is Compound protocol the one spending millions of dollars for the work? Yeah. In my book, the guy who is opening his wallet is the one who dictates the terms of engagement. To that end, it’s my opinion that Compound should be laying out the process by which it buys things rather than the other way around.

Practically speaking, Compound doesn’t make any decisions on its own (wouldn’t that be nice); it’s the tokenholders/community that make the decisions. How then should tokenholders/community members proceed on making the decision of which vendor wins the audit work? I’d like to propose several options:

• Tokenholders delegate purchasing authority to a group of individuals. The idea here is it’s impractical to have a tokenholders/community members evaluate vendors. Most large tokenholders aren’t experienced in evaluating audit vendors; instead, they could delegate authority to a group of experienced folks to make the purchasing decision on their behalf. This group of folks could evaluate the vendors, publish an analysis, and make a recommendation to tokenholders. If the tokenholders agree, they would vote for the “recommended” vendor.

• Tokenholders vote on the vendor. A faster but slightly more chaotic process would be for tokenholders/community members to informally assign a deadline by which interested audit firms must submit proposals. After that date, no new proposals will be accepted. The “accepted” proposals can then be put up for an on-chain vote. Let the best vendor win!

As far as timing goes (if we go with the second option), I think it’s fair to honor OZ’s request of having the vote start on December 6. As part of that, we can set an informal rule saying that all proposals must be submitted on the forums a week before that — November 29. Would that mean that vendors posting their proposals after that are automatically disqualified from the vote? No. But it would mean that they would be tardy to the informal deadline set by the community, which reflects poorly on them. And if they can’t get their act together by then, then do we really want them as our vendor of choice? Probably not.

Anyway, that’s how I’d go about it. Now for some turkey…

[dguido]

@OZSecure

We would request that a vote start NLT 1200 PST, Dec 6, 2021. Secondly, whatever vote date is selected, we would kindly ask that the proposals be locked one week before the vote, so we can revise our proposal one last time, given that our proposal has been open for scrutiny and copying since we proposed it on Nov 4, 2021.

For what it’s worth, I agree with the dates suggested by Open Zeppelin here. We’ll post a full proposal within the next day and think it’s appropriate to have a vote shortly after.

[OZSecure]

@jacobpphillips, @sukernik, @allthecolors, @dvf, @dguido thank you, great recent comments and feedback.

It seems like now is a good opportunity to “clear the air” and address several items as well as specificities related to this Proposal and discussions.

First and foremost, we are new to working and partnering with DAOs and made some assumptions about the speed at which we should approach this process. We were also surprised by the lack of competing bids during the 2-3 week period that we presented our proposal. We assumed, incorrectly, that given the lack of bids we should go ahead and press forward with a vote. We did consult with various folks privately and they also felt it was strange that no other firms jumped into the fray. As such we went forward, even though we understand that people like @Getty were publicly pushing for competition. We understand this could have looked like we were pushing through a vote without proper competition or time for the community to reflect. However if you put yourself in OpenZeppelin's position, it made sense to continue moving forward with the process. Even in retrospect we still are not sure how we would have known when the right time to pull the trigger would have been, but understand how this could have been perceived as high pressure. @allthecolors and others hope that give some context

Secondly in regards to the streaming payment method we chose, it had been used before, and given the parameters available made more sense to use than asking for a lump sum payment for a year or half year etc. We felt that it would have been wrong for us to ask for a bunch of money upfront as opposed to having it stream out and let governance end the stream when appropriate. Lesson learned here as well…@arr00 and others hoping this gives our perspective. Please let us know what you would have suggested here...

Thirdly, in regards to the performance fee and its binary nature. We listened to the initial feedback and given the complexities of changing it, specifically suggested that the community continue discussing the fee and delay it until the end of March next year. We did not include this fee in our formal proposal for the vote Also, at the last community call, we discussed that we were postponing the decision on this fee and also discussed that it would make sense for us to roll in concepts that blockchain @ berkeley were proposing vis a vis bug bounties.

We now understand that even though competition was demanded, even necessary for some, Compound Governance doesn’t have a tried and true mechanism for evaluating competing vendors and that we are treading on new ground here. Therefore we are happy to be patient as the Community deliberates on what the best way forward is here.

In the meantime, we will be revising our proposal to reflect community feedback and our new thinking on the performance fees, as well as various Q&A that has come from this process.

Please keep the feedback coming and we look forward to all your thoughts and comments!

[HRitzdorf]

Security Solutions for DAOs

Overview

We live in a new world where more and more DAOs are in control of a project. Ensuring that safe choices are made is a major challenge and DAOs have been exploring different approaches. According to current proposals, Compound would effectively outsource their security to a vendor who would take care of various security-related needs.

We believe that this approach is not the route to take. The chosen audit company would become a critical dependency for the protocol. The suggested solutions with their intransparent, quarterly, lump-sum payment for a mix of services do not focus on the most effective tools. Hence, we would like to suggest a process that can leverage the strength of the security community.

The main security challenge for a protocol like Compound is the growing complexity that needs to be taken into account with every change:

• Due to upgradability, Compound needs to ensure compatibility with previous versions. Failure to do so can have significant consequences.
• As cTokens are used in various other DeFi protocols, these integrations must not be affected by the proposed changes.
• While certain governance votes are being voted on, others are in development or under review. This creates complicated dependencies.
• As the Compound protocol grows and starts to consist of more contracts it must be ensured that all contracts still interact correctly. A current compound liquidation involves roughly ten contracts and roughly fifty calls between these contracts.

Overall, we conclude that such systems exhibit quadratic complexity growth. To tackle this, we aim for scalability. Furthermore, we believe that the security can best be ensured by a broad base of security providers. This prevents any form of vendor lock-in and conflicts of interest, while allowing to combine the strengths of different providers.

Suggested Process in a Nutshell

Our suggested process is as follows and acts on different stages of the DAO:

In detail our process has the following steps:

• Early feedback during RFP stage with code reviewers adding security consideration paragraphs

  • This often reduces review cycles and hence development costs, review costs and time-to-market as code reviewers can foresee likely issues
  • Example: Security considerations for RFP 8: Balancer V2 liquidity as collateral | $25k

    The RFP aims to allow Balancer V2 liquidity as collateral. Recent attacks against cream.finance have shown that repeated borrowing can create an extremely leveraged position. When reviewing the security, special care must be taken to ensure that the value of the liquidity tokens cannot be artificially inflated. This would cause the protocol to lose funds as the collateralization ratio is insufficient to compensate for the price change. An attacker could extract these protocol losses and hence retroactively finance the artificial inflation of the liquidity token values.

• Perform thorough code review of newly developed code

  • Thorough expert code review of to-be-deployed code is still the most effective tool available today.
  • Code reviewers inform the developers about all shortcomings related to security, efficiency or design.
  • During code review, code reviewers jointly contribute to an audit suite by encoding all successful attacks as well as attacks that are currently not possible but might work in the future.

• Develop an audit suite

  • Composed primarily of extensive tests executable against forked mainnet at any point in time, allowing to continuously evaluate the security of the protocol and new proposal
  • The audit suite is open source under the same license as Compound Smart Contracts (BSD-3). It must be executable publicly without restriction by having suitable licenses in place for potentially proprietary components.

• Leverage tool-based analysis where efficiently possible

  • Program Verification Tools currently cannot show correctness for a protocol as complex as Compound.
  • Use tools selectively with more complicated techniques to validate correct behavior of subsystems, e.g., formal verification, static analysis or fuzzing.

• Perform the Proposal Verification

  • Once the development has completed, the proposal is prepared on-chain.
  • The extended test against forked mainnet of the audit suite allow anyone to verify the compatibility of the proposal. In particular they can check that the proposal does not break any integrations and is compatible with previous versions.
  • As the proposal includes the concrete parameters chosen, these parameters can be verified as part of this step.

In contrasts to other suggested processes, we focus on prevention. While monitoring is certainly nice to have, Compound already has some monitoring and attacks often take place in one (large) transaction. Hence monitoring and alerting have limited effectiveness, especially considering the present timelocks.

Finding Suitable Code Reviewers

The biggest hurdle for code reviewers getting into a new complex system is the required initial investment to understand it. Fluctuation and internal availability of employees also require any review companies to constantly invest into training, which can reduce either quality in times of high demand.

To tackle these problems, we propose the following general solution:

• Compound Governance votes in several code reviewers each year to onboard into auditing through a paid training phase.

• Auditors apply to become wardens of Compound by providing:

  • An example of how a code review for the Comptroller and the cToken would be performed, detailing methods and time required.
  • The cost and amount of hours reserved for Compound per quarter, which are if accepted guaranteed to be paid by Compound.
  • The expected compensation for the training phase.

• On-boarding code reviewers can also greatly benefit from the existing audit suite which contains many relevant attack scenarios.

  • Any time reserved for Compound not spent on reviewing code or RFPs is used to improve this audit suite.

• Auditors who are selected by Governance and complete the training take shared ownership of the audit suite and collectively improve the coverage.

  • Delivering good work in improving the Compound Audit Suite will likely be used to evaluate the quality of the auditor which aligns interests long-term by increasing the likelihood of being voted in again next year.

Benefits of the Audit Suite

• Auditors think of many cases, most of which are not exploitable currently. Putting them in the suite helps to test for this case going forward. It aggregates knowledge from multiple code reviews and companies.
• Expert know-how of the system and the possible attacks against it are captured for future auditors.
• With testing against forked mainnet it is possible to simulate the effects of all the currently open proposals independently as well as combined.
• The Audit Suite enforces the definition of explicit value ranges, making code reviews more effective and simplifying certain governance proposals which just update parameters within those ranges.
• It provides extremely good feedback for developers reducing review cycles and thereby financial and temporal overhead.
• Auditors will gain confidence in having audited the system holistically even when reviewing seemingly small changes.
• Tasks that needs to be performed repeatedly, such as the compatibility check with past versions, can be automated once and efficiently repeated.
• The suite ensures the correctness of on-chain proposals including correctly chosen parameters which are generally not part of the code review.
• Given its design the audit suite provides a decentralized and permissionless mechanism for community members to inspect the state of the protocol and to evaluate ongoing proposals.

Considering all these benefits, we believe that the audit suite can provide the necessary scalability by capturing a lot of the growing complexity. It requires an initial investment to build it up, but we consider it worthwhile.

Summary

Our suggestion incentivizes broad participation from small to large security companies. Thereby, it broadens the base of experts in Compound and leverages proven techniques. Using the audit suite, we can aggregate the knowledge and insights from multiple audits (instead of only relying on the last audit) and thereby tackle the growing complexity. We believe that this provides a viable long-term solution.

While even a single audit company chosen to shepherd the protocol could write such an audit suite, only by having multiple companies who rely on each other to have covered critical parts of the system enforces that a public, high-quality audit suite gets created. It also allows every security provider to play to their strengths when contributing. Lastly, it allows a decentralized verification of proposals by any community member.

[Rk2357]

@sukernik @dguido @OZSecure
Hi everyone, I’m Rishabh from Blockchain at Berkeley.

Thank you to both the OpenZeppelin and TrailOfBits teams for starting a discussion of the need for more Compound security. While the entire community seems to agree on the need for security, there is the question of which company to procure those services from. I also agree with Larry that we should allow other security companies to forward their bid for the contract as well.

Overall, I believe, of the two options that Larry presents, the second is overall more beneficial to the protocol.

1. Direct voting by tokenholders is most in-line with the spirit of decentralized governance. Voting should not be filtered through the lens of some pre-selected committee; it adds additional layers of unnecessary bureaucracy.
2. In OZ’s original proposal, they highlighted the need for quick iteration on this issue. Other commenters have tended to agree. Direct voting lets one company start work on this issue as fast as possible, rather than having to wait for some committee to deliberate, then possibly multiple governance proposal cycles (if the tokenholders reject the committee’s recommendation).

However, the immediate problem with this idea is that Compound proposals have traditionally only supported only Yes, No, or Abstain votes. However, in the Governor Bravo contract, there is an option for voters to attach text to their on-chain votes. Thus, if we assign each candidate in our vote a two-letter code, we can measure the support for each option through the comments.

Supporting multiple options in proposals is also a necessary step for Compound governance, so that tokenholders can make more complex decisions in the future (i.e. elected positions, setting variable parameters, etc.).