How Missing Deadline Parameters in DeFi Smart Contracts Can Lead to Losses: Best Practices for Security

Decentralized Finance (DeFi) continues to revolutionize the financial world with its automated protocols and decentralized nature, offering immense flexibility to users.

However, with great potential come significant risks, especially when it comes to smart contract vulnerabilities. One often overlooked yet critical issue in DeFi is the absence of proper deadline parameters in smart contract transactions, particularly in Automated Market Makers (AMMs). This post will dive into why deadline parameters are essential and how their absence can expose users to substantial risks, using insights from Sherlock's BlueBerry Update 1 competition.

### The Role of Deadline Parameters in DeFi

In advanced DeFi protocols like Automated Market Makers (AMMs), users can execute trades without relying on centralized exchanges. These protocols often allow users to set a **deadline parameter** — a time limit for executing a transaction. If the transaction is not completed within this timeframe, it is automatically canceled. 

However, if this parameter is absent or not set correctly, the transaction may remain in the **mempool** (the temporary storage for pending transactions) indefinitely, which could lead to significant problems for users. A delayed transaction might execute at an unfavorable time, leading to financial losses.

### Why Not Use Block Timestamps as Deadlines?

One might assume that simply setting the **block.timestamp** as the deadline would solve the issue. However, this approach offers little protection. Validators can intentionally delay transactions, and the block in which they finally include the transaction will still reflect the block.timestamp. This means a transaction can be held and executed at a time that is highly disadvantageous for the user.

To mitigate this risk, protocols should provide users with the option to set their own deadlines. Failure to do so can leave users vulnerable, particularly in volatile markets where price fluctuations happen within seconds.

### Case Study: Sherlock's BlueBerry Update 1 Competition

The Sherlock's BlueBerry Update 1 competition revealed a critical vulnerability in a DeFi protocol where no deadline or slippage parameters were set, exposing users to significant risk. The following smart contract snippet highlights this issue:

solidity
uint256 rewards = _doCutRewardsFee(CRV);
_ensureApprove(CRV, address(swapRouter), rewards);
swapRouter.swapExactTokensForTokens(
    rewards,
    0, // @audit no slippage, can receive 0 output tokens
    swapPath,
    address(this),
    type(uint256).max // @audit no deadline, transaction can
    // be executed later at more unfavorable time
);

Here, we can observe two major issues:
1. The **minTokensOut** parameter is hard-coded as `0`, meaning that the swap could return no tokens in exchange.
2. The **deadline** parameter is set to the maximum value of `uint256`, allowing the transaction to be executed at any time, even at an unfavorable future date.

The absence of both slippage and deadline parameters in this code creates a severe vulnerability. If the transaction is delayed, the user could potentially receive nothing in return for their tokens, leading to a complete loss of their staked assets.

### Why This Matters for DeFi Security

This example underscores the importance of implementing proper security measures in DeFi protocols, especially regarding deadline and slippage parameters. In the highly volatile world of cryptocurrency, even a few seconds of delay can result in drastic changes in token prices, making it critical for users to have control over when and how their transactions are executed.

### Best Practices for Developers

To prevent users from suffering losses due to delayed or unfavorable transactions, DeFi developers should:
1. **Allow customizable deadlines:** Enable users to specify a deadline to ensure that their transactions are executed within a reasonable time frame.
2. **Incorporate slippage protection:** Always allow users to define a minimum acceptable amount of tokens to receive from a trade to avoid receiving zero or significantly fewer tokens.
3. **Avoid using max values for deadlines:** Setting a `uint256.max` deadline, as shown in the example, can lead to prolonged delays, during which market conditions can worsen.
4. **Educate users on transaction risks:** Many DeFi users may not be aware of the implications of missing deadline and slippage parameters. Providing clear guidance on setting these parameters will help users protect their investments.

### Conclusion

The rise of DeFi has brought unprecedented opportunities for financial autonomy and growth. However, as protocols become more sophisticated, so too do the risks of overlooking essential parameters like deadlines and slippage. By implementing proper protections in smart contracts, developers can reduce the potential for user losses, increase trust in their platforms, and enhance overall security in the DeFi space. 

As we look forward to the continued evolution of DeFi, it is crucial that both developers and users remain vigilant in addressing vulnerabilities and adopting best practices to safeguard the ecosystem.