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Reservoir Protocol - MorphoUnderlyingAdapter updates and PSM - FortunaFi

Prepared by:

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HALBORN

Last Updated 11/12/2025

Date of Engagement: July 7th, 2025 - July 8th, 2025

Summary

100% of all REPORTED Findings have been addressed

All findings

2

Critical

0

High

0

Medium

0

Low

1

Informational

1

Table of Contents

1. Introduction

FortunaFi engaged Halborn to conduct a security assessment on their smart contracts beginning on July 7th, 2025 and ending on July 8th, 2025. The security assessment was scoped to the smart contracts provided to Halborn. Commit hashes and further details can be found in the Scope section of this report.


The Reservoir codebase in scope consists of 2 different smart contracts. One allows users to provide an underlying token and in return, get minted RUSD. The other one is a Morpho adapter.

2. Assessment Summary

Halborn was provided 2 days for the engagement and assigned a full-time security engineer to review the security of the smart contracts in scope.

 

The purpose of the assessment is to:

    • Identify potential security issues within the smart contracts.

    • Ensure that smart contract functionality operates as intended.


In summary, Halborn identified some improvements to reduce the likelihood and impact of risks, which were partially addressed by the FortunaFi team. The recommendations were:

    • Consider using forceApprove() and safeTransfer() to properly support USDT.

    • Consider setting a fixed pragma version.


3. Test Approach and Methodology

Halborn performed a manual review of the code. Manual testing is great to uncover flaws in logic, process, and implementation.

The following phases and associated tools were used throughout the term of the assessment:

    • Research into architecture, purpose and use of the platform.

    • Smart contract manual code review and walkthrough to identify any logic issue.

    • Thorough assessment of safety and usage of critical Solidity variables and functions in scope that could led to arithmetic related vulnerabilities.


4. RISK METHODOLOGY

Every vulnerability and issue observed by Halborn is ranked based on two sets of Metrics and a Severity Coefficient. This system is inspired by the industry standard Common Vulnerability Scoring System.
The two Metric sets are: Exploitability and Impact. Exploitability captures the ease and technical means by which vulnerabilities can be exploited and Impact describes the consequences of a successful exploit.
The Severity Coefficients is designed to further refine the accuracy of the ranking with two factors: Reversibility and Scope. These capture the impact of the vulnerability on the environment as well as the number of users and smart contracts affected.
The final score is a value between 0-10 rounded up to 1 decimal place and 10 corresponding to the highest security risk. This provides an objective and accurate rating of the severity of security vulnerabilities in smart contracts.
The system is designed to assist in identifying and prioritizing vulnerabilities based on their level of risk to address the most critical issues in a timely manner.

4.1 EXPLOITABILITY

Attack Origin (AO):
Captures whether the attack requires compromising a specific account.
Attack Cost (AC):
Captures the cost of exploiting the vulnerability incurred by the attacker relative to sending a single transaction on the relevant blockchain. Includes but is not limited to financial and computational cost.
Attack Complexity (AX):
Describes the conditions beyond the attacker’s control that must exist in order to exploit the vulnerability. Includes but is not limited to macro situation, available third-party liquidity and regulatory challenges.
Metrics:
EXPLOITABILITY METRIC (mem_e)METRIC VALUENUMERICAL VALUE
Attack Origin (AO)Arbitrary (AO:A)
Specific (AO:S)		1
0.2
Attack Cost (AC)Low (AC:L)
Medium (AC:M)
High (AC:H)		1
0.67
0.33
Attack Complexity (AX)Low (AX:L)
Medium (AX:M)
High (AX:H)		1
0.67
0.33
Exploitability EE is calculated using the following formula:

E=∏meE = \prod m_e

4.2 IMPACT

Confidentiality (C):
Measures the impact to the confidentiality of the information resources managed by the contract due to a successfully exploited vulnerability. Confidentiality refers to limiting access to authorized users only.
Integrity (I):
Measures the impact to integrity of a successfully exploited vulnerability. Integrity refers to the trustworthiness and veracity of data stored and/or processed on-chain. Integrity impact directly affecting Deposit or Yield records is excluded.
Availability (A):
Measures the impact to the availability of the impacted component resulting from a successfully exploited vulnerability. This metric refers to smart contract features and functionality, not state. Availability impact directly affecting Deposit or Yield is excluded.
Deposit (D):
Measures the impact to the deposits made to the contract by either users or owners.
Yield (Y):
Measures the impact to the yield generated by the contract for either users or owners.
Metrics:
IMPACT METRIC (mIm_I)METRIC VALUENUMERICAL VALUE
Confidentiality (C)None (C:N)
Low (C:L)
Medium (C:M)
High (C:H)
Critical (C:C)		0
0.25
0.5
0.75
1
Integrity (I)None (I:N)
Low (I:L)
Medium (I:M)
High (I:H)
Critical (I:C)		0
0.25
0.5
0.75
1
Availability (A)None (A:N)
Low (A:L)
Medium (A:M)
High (A:H)
Critical (A:C)		0
0.25
0.5
0.75
1
Deposit (D)None (D:N)
Low (D:L)
Medium (D:M)
High (D:H)
Critical (D:C)		0
0.25
0.5
0.75
1
Yield (Y)None (Y:N)
Low (Y:L)
Medium (Y:M)
High (Y:H)
Critical (Y:C)		0
0.25
0.5
0.75
1
Impact II is calculated using the following formula:

I=max(mI)+∑mI−max(mI)4I = max(m_I) + \frac{\sum{m_I} - max(m_I)}{4}

4.3 SEVERITY COEFFICIENT

Reversibility (R):
Describes the share of the exploited vulnerability effects that can be reversed. For upgradeable contracts, assume the contract private key is available.
Scope (S):
Captures whether a vulnerability in one vulnerable contract impacts resources in other contracts.
Metrics:
SEVERITY COEFFICIENT (CC)COEFFICIENT VALUENUMERICAL VALUE
Reversibility (rr)None (R:N)
Partial (R:P)
Full (R:F)		1
0.5
0.25
Scope (ss)Changed (S:C)
Unchanged (S:U)		1.25
1
Severity Coefficient CC is obtained by the following product:

C=rsC = rs

The Vulnerability Severity Score SS is obtained by:

S=min(10,EIC∗10)S = min(10, EIC * 10)

The score is rounded up to 1 decimal places.
SeverityScore Value Range
Critical9 - 10
High7 - 8.9
Medium4.5 - 6.9
Low2 - 4.4
Informational0 - 1.9

5. SCOPE

REPOSITORIES
(a) Repository: psm
(b) Assessed Commit ID: a6e9e86
(c) Items in scope:
  • PSM.sol
Out-of-Scope: External dependencies and economic attacks.
(a) Repository: reservoir
(b) Assessed Commit ID: https://github.com/reservoir-protocol/reservoir/pull/15/files
(c) Items in scope:
  • MorphoUnderlyingAdapter.sol
Out-of-Scope: External dependencies and economic attacks.
Remediation Commit ID:
Out-of-Scope: New features/implementations after the remediation commit IDs.

6. Assessment Summary & Findings Overview

Critical

0

High

0

Medium

0

Low

1

Informational

1

Security analysisRisk levelRemediation Date
USDT is not properly supportedLowSolved - 07/10/2025
Floating pragmaInformationalAcknowledged - 11/05/2025

7. Findings & Tech Details

7.1 USDT is not properly supported

//

Low

Description
BVSS
Recommendation
Remediation Comment
Remediation Hash
https://github.com/reservoir-protocol/psm/commit/683a912f5132d0e64fcf7c1e06955979330490ae

7.2 Floating pragma

//

Informational

Description
BVSS
Recommendation
Remediation Comment

Halborn strongly recommends conducting a follow-up assessment of the project either within six months or immediately following any material changes to the codebase, whichever comes first. This approach is crucial for maintaining the project’s integrity and addressing potential vulnerabilities introduced by code modifications.

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Reservoir Protocol - MorphoUnderlyingAdapter updates and PSM

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