ERC-4626 Tokenized Vault Standard

Table of contents

• Table of contents
• General
  • Basic Concept
  • Functions
    • View
    • Mutable state
  • Best practice
• Security Considerations
  • View functions are inconsistent lead to miscalculate amount shares/assets
  • Slippage on deposit/withdrawal
  • Be careful with all of CREATIVITY IMPLEMENTATION
  • Helpful link

General

Basic Concept

The ERC-4626, also known as tokenized Vault, is an implementation of an ERC-20 token representing shares. The Vault holds a single asset as the underlying ERC-20 token.

The ERC-4626 Vault provides basic functionality for depositing and withdrawing tokens and viewing balances.

• share: The token of the Vault. Has a ratio of underlying assets exchanged on mint/deposit/withdraw/redeem (as defined by the Vault).
• asset: The underlying token managed by the Vault. Has units defined by the corresponding EIP-20 contract.
• fee (optional): Amount token of asset or share charged to the user by the Vault.
• slippage (should have): Any difference between advertised share price and economic realities of deposit to or withdrawal from the Vault, which is not accounted by fees.

Functions

View

• convertToShares, previewDeposit: Have same functionality that calculate amount of shares when deposit amount of assets.
• previewMint: Give amount of shares and output is amount of assets needed deposit.
• convertToAssets, previewRedeem: Have same functionality that calculate amount of assets when deposit amount of shares.
• previewWithdraw: Give amount of withdrawal assets and output is amount of share needed.

Mutable state

• deposit, mint: Deposit asset and receive share.
• withdraw, redeem: Withdraw asset and burn share.

Best practice

• All ERC-4626 tokenized Vaults MUST implement EIP-20 to represent shares.
• All ERC-4626 tokenized Vaults MUST implement EIP-20’s optional metadata extensions.
• The name and symbol functions SHOULD reflect the underlying token’s name and symbol in some way.
• MAY revert on calls to transfer or transferFrom when a Vault is to be non-transferrable.
• EIP-4626 tokenized Vaults MAY implement ERC-2612 to improve the UX of approving shares on various integrations.

Security Considerations

Most security issues arise when the ratio of asset to share is greater than 1.

View functions are inconsistent lead to miscalculate amount shares/assets

Check the ratio and conversion formulas.

Ensure proper rounding, accounting for decimals, consistent calculations,…

Slippage on deposit/withdrawal

Check the minimum reception amount of shares/assets when depositing or withdrawing.

Be careful with all of CREATIVITY IMPLEMENTATION

Avoid incorrect overriding of functions.

Ensure consistency in function overrides.

Helpful link

• https://www.arbitraryexecution.com/blog/shared-vulnerabilities-between-erc-4626-vaults-and-vault-like-contracts-deep-dive-part-1
• https://www.arbitraryexecution.com/blog/shared-vulnerabilities-between-erc-4626-vaults-and-vault-like-contracts-deep-dive-part-2
• https://www.arbitraryexecution.com/blog/shared-vulnerabilities-between-erc-4626-vaults-and-vault-like-contracts-deep-dive-part-3