DarkTower-Q.md

[L-1] PausableUpgradeable is not initialized in rOUSG

In the rOUSG.sol contract, pausing functionality is not initialized by calling __Pausable_init() inside the initialize function. Thus, the contract cannot be paused. https://github.com/code-423n4/2024-03-ondo-finance/blob/main/contracts/ousg/rOUSG.sol#L58

contract ROUSG is
  ...
@>  PausableUpgradeable,
  ...
{

As can be seen, the initialize function lacks initialization of the pausing mechanism: https://github.com/code-423n4/2024-03-ondo-finance/blob/main/contracts/ousg/rOUSG.sol#L102-L110

function initialize(
    address _kycRegistry,
    uint256 requirementGroup,
    address _ousg,
    address guardian,
    address _oracle
  ) public virtual initializer {
    __rOUSG_init(_kycRegistry, requirementGroup, _ousg, guardian, _oracle); // @doesn't init pausable
  }

Pausing mechanism should be setup like so:

function initialize(
    address _kycRegistry,
    uint256 requirementGroup,
    address _ousg,
    address guardian,
    address _oracle
  ) public virtual initializer {
    __rOUSG_init(_kycRegistry, requirementGroup, _ousg, guardian, _oracle);
+   __Pausable_init();
  }

[L-2] Transfer event topics of the burn() function is in the wrong order

In the rOUSG.sol contract, the burn() function emits the Transfer event topics in the wrong order. https://github.com/code-423n4/2024-03-ondo-finance/blob/main/contracts/ousg/rOUSG.sol#L638

function burn(
    address _account,
    uint256 _amount
  ) external onlyRole(BURNER_ROLE) {
    ...

    _burnShares(_account, ousgSharesAmount);

    ousg.transfer(
      msg.sender,
      ousgSharesAmount / OUSG_TO_ROUSG_SHARES_MULTIPLIER
    );
@>  emit Transfer(address(0), msg.sender, getROUSGByShares(ousgSharesAmount)); // @audit-low wrong order of topics
    emit TransferShares(_account, address(0), ousgSharesAmount);
  }

As can be seen in the EIP20, the Transfer event should follow the below order: https://eips.ethereum.org/EIPS/eip-20

event Transfer(address indexed _from, address indexed _to, uint256 _value)

A note from the EIP 20 specification:

A token contract which creates new tokens SHOULD trigger a Transfer event with the _from address set to 0x0 when tokens are created.

But as we can see above in the Transfer event implementation of the burn() function, the topics are in the wrong order as we are not creating or minting new tokens to be setting the from address as the 0x0 address. Instead, the from address should be the address the rOUSG is being burnt from and the to address should be the 0x0 address.

Hence, the order of topics should be as follows:

function burn(
    address _account,
    uint256 _amount
  ) external onlyRole(BURNER_ROLE) {
    ...

    _burnShares(_account, ousgSharesAmount);

    ousg.transfer(
      msg.sender,
      ousgSharesAmount / OUSG_TO_ROUSG_SHARES_MULTIPLIER
    );
+    emit Transfer(_account, address(0), getROUSGByShares(ousgSharesAmount));
-    emit Transfer(address(0), msg.sender, getROUSGByShares(ousgSharesAmount));
    emit TransferShares(_account, address(0), ousgSharesAmount);
  }

[N-1] Employ a more uniform naming convention for BURNER_ROLE

In the rOUSG.sol contract, roles are not uniformly named and hashed into their bytes32 equivalent. https://github.com/code-423n4/2024-03-ondo-finance/blob/main/contracts/ousg/rOUSG.sol#L94

 bytes32 public constant BURNER_ROLE = keccak256("BURN_ROLE"); <--

A better naming to follow similarly how the PAUSER_ROLE was setup should be:

  bytes32 public constant PAUSER_ROLE = keccak256("PAUSER_ROLE");
- bytes32 public constant BURNER_ROLE = keccak256("BURN_ROLE");
+ bytes32 public constant BURNER_ROLE = keccak256("BURNER_ROLE");

[N-2] _mintShares can do without the whenNotPaused modifier as the wrap() function already enforces it

In the rOUSG.sol contract, minting of shares are possible when the contract is not paused. When two functions (public/external & private/internal) reference the same whenNotPaused modifier, the inner function can do without the modifier in the case that such inner function won't be reached any other way other than the outer function. https://github.com/code-423n4/2024-03-ondo-finance/blob/main/contracts/ousg/rOUSG.sol#L415

function wrap(uint256 _OUSGAmount) external whenNotPaused { // note: pause mechanism protection
    ...
@>  _mintShares(msg.sender, ousgSharesAmount);
    ...
  }

https://github.com/code-423n4/2024-03-ondo-finance/blob/main/contracts/ousg/rOUSG.sol#L532

 function _mintShares(
    address _recipient,
    uint256 _sharesAmount
  ) internal whenNotPaused returns (uint256) { <-----@
    ...
  }

Get rid the inner whenNotPaused modifier in the _mintShares function:

  function _mintShares(
    address _recipient,
    uint256 _sharesAmount
+  ) internal returns (uint256) {
-  ) internal whenNotPaused returns (uint256) {
   ...
  }