Bug Bounty Vault Proposal by Hats Finance

[Fav_Truffe]

TLDR

This is a proposal for Uniswap to collaborate with Hats.finance to create an on-chain, free, non-custodial, scalable and permissionless incentives pool for hackers/auditors to protect the Uniswap smart contracts.

Abstract

The direct losses from hacks and exploits between 2020-2022 are above $15B, and yet, the solutions currently being offered are not decentralized, permissionless, scalable, and continuous and open to everybody like Uniswap is.

This proposal aims to create an incentives pool on Hats Protocol for hackers/auditors to help protect the Uniswap smart contracts. The goal of the vault is to incentivize responsible vulnerability disclosure for Uniswap. Liquidity can be added (with $UNI and/or yield-bearing tokens) permissionless and LPs will be rewarded with $HAT tokens once the liquidity mining program is launched.

Motivation

Hats.finance is an on-chain decentralized bug bounty platform specifically designed to prevent crypto-hack incidents by offering the right incentives. Additionally, Hats.finance allows anyone to add liquidity to a smart bug bounty. Hackers can disclose vulnerabilities responsibly without KYC & be rewarded with scalable prizes & NFTs for their work.

Smart bug bounty programs are a win-win for everyone. They can be created easily with a few on-chain transactions (it takes less than 1 hour to set up a vault on Hats), and are free of charge. Hats will only charge a fee once an incident has been successfully mitigated. The protocol will retain 10% of the payout as fee from the security researcher. Scenarios of an exploit are way more costly and can cause irreversible damage. More importantly, the bounty program is transparent, decentralized, and gives power to the community of the project.

On-chain submission:

With the values of Ethereum, which are lighting our way, we decided to take a different approach to bug bounty compared to the traditional and centralized bug bounty platforms.

The submitter writes a detailed vulnerability description on Hats dApp. The submission is encrypted with the project PGP key. The user hashes the encrypted description (automatically) and sends a transaction on-chain with that Hash (only the Hash of the encrypted report is going on-chain), While sending the encrypted message to the routing bot.

The tx fee acts as a spam filter and can be set to a higher value (in the future).

The routing bot verifies that the Hash of the encrypted message was published on-chain and publishes the encrypted message to the committee group together with a link to a front-end open source tool to decrypt the messages that are stored on IPFS that is part of Hats dApp.

Specification

In case that the proposal gets accepted, Uniswap is expected to:

1- Choose and set up a committee

2- Vote for DAO participation amount

Onboarding action items:

• Choosing a committee: The committee is preferably the public multisig contract of Uniswap or a multisig specifically set up to manage the bounty program.
• The Committees responsibility:
  • Triage incoming vulnerability reports/claims from auditors/hackers (get back to the reporter within 12 hours).
  • Approve claims within a reasonable time frame (Max. of 6 days)
  • Set up repositories and contracts under review. (A list of all contracts covered by the bounty program separated by severity)

Rationale

The key advantage of Hats solution compared to traditional, centralized bug bounty services:

• Bug bounty vaults are loaded with the native or yield bearing token of each project. Reducing the free floating supply while giving the token additional utility.
• Scalable bounty network — vault TVL increases with success / token appreciation of the project.
• Open & Permissionless — Anyone can participate in the protection of an asset they are a stakeholder of and any hacker, anywhere in the world, can participate anonymously when disclosing exploits (no KYC needed)
• In the future when providing liquidity (taking risk) every depositor could earn $HAT tokens.
• Continuous — As long as tokens are locked in the vault, hackers are incentivized to disclose vulnerabilities through Hats, instead of exploiting the project.

Additional advantages of deployment of the existing Uniswap bug bounty program on Hats Protocol:

• Uniswap can reach out to many more security researchers (aka white hat hackers) with a bounty on Hats protocol and each scrutiny will make Uniswap safer.
• Uniswap can fund the bug bounty vault on Hats with its own native token ($UNI or yield bearing token)
• The bounty reward for the submitter is not paid at once to reduce the price pressure on the project token.

Since Uniswap DAO will be farming $HAT tokens with its bounty (after TGE), it’s a cost negative opportunity for Uniswap DAO.

Key Examples

A security researcher recently found a critical severity within Premia Finance’s staking contracts and got rewarded $70k for his responsible disclosure:

https://twitter.com/HatsFinance/status/1663243357160890369)

In one of the recent audit competitions, the security researchers could find 3 critical severities in Raft Finance’s code in a 7 days long audit contest even if the project went under an extensive audit by one of the top-tier auditing firms in the space:

Raft Finance Audit Competition- Final Note

A security researcher could find a medium severity vulnerability in HOPR contracts:

HOPR 🟡

[Doo_StableLab]

Can you share some light on current Uniswap’s bug bounty programs and in your opinion, why it’s not sufficient?

@Fav_Truffe

• Uniswap can reach out to many more security researchers (aka white hat hackers) with a bounty on Hats protocol and each scrutiny will make Uniswap safer.
• Uniswap can fund the bug bounty vault on Hats with its own native token ($UNI or yield bearing token)
• The bounty reward for the submitter is not paid at once to reduce the price pressure on the project token.

I feel like all of those can be done in the current model? For example, if needed, give out in $UNI token or not paying the reward at once?

@Fav_Truffe

Since Uniswap DAO will be farming $HAT tokens with its bounty (after TGE), it’s a cost negative opportunity for Uniswap DAO.

This is a misleading comment as we don’t know the price of $HAT in the future. Therefore, if the team indeed believes that “cost negative opportunity” then we suggest the team guarantees that if the cost is greater than the token farmed, the team provides needed fund to fill the gap.

[Fav_Truffe]

Hey @Doo_StableLab! Thanks a lot for taking the time to reflect.

@Doo_StableLab

Can you share some light on current Uniswap’s bug bounty programs and in your opinion, why it’s not sufficient?

In my humble opinion, Uniswap, as the market leader in DeFi, should be at the forefront to support decentralization ethos. Otherwise, why use Uniswap instead of centralized Web2 alternatives? I am of the opinion that it would contribute a lot to the wider ecosystem if Web3 projects, especially top-notch ones like Uniswap, would prioritize Web3 native products over centralized/Web2 alternatives.

@Doo_StableLab

I feel like all of those can be done in the current model? For example, if needed, give out in $UNI token or not paying the reward at once?

Hats Finance is very well known in security and Uniswap’s deployment of its bug bounty program on Hats protocol would potentially enrich the target audience.

Secondly, Hats Finance provides the security researchers with decentralized dispute court (in partnership with Kleros court). Accordingly, security researchers would be more comfortable with submitting vulnerabilities on Hats protocol from a game-theory perspective with the idea that a specialized third party court will see their case if they are treated unfairly.

@Doo_StableLab

This is a misleading comment as we don’t know the price of $HAT in the future. Therefore, if the team indeed believes that “cost negative opportunity” then we suggest the team guarantees that if the cost is greater than the token farmed, the team provides needed fund to fill the gap.

You are right! I made a mistake while editting the proposal. The way it should be was “Since Uniswap can use any yield-bearing token to fund the bug bounty vault, there will not be any opportunity-cost for Uniswap.”

Additionally, potentially farming $HAT token would be another advantage over the current implementation of Uniswap bug bounty program.

Appreciate the questions, looking forward to hearing more

[Doo_StableLab]

@Fav_Truffe

In my humble opinion, Uniswap, as the market leader in DeFi, should be at the forefront to support decentralization ethos. Otherwise, why use Uniswap instead of centralized Web2 alternatives?

I think it’s up to the community to decide and Uniswap indeed supports many web3 options, but at the end of the day is about what is more effective and provide better security. For example, using the same logic, although Hats Finance is a web3 project, the links you shared above are Medium and Twitter, which are both Web2.

So once again, beside web2 vs web3 difference, the focus should be on whether there are issues with the current Uniswap bug bounty program. This will be helpful to the community to evaluate.

@Fav_Truffe

Secondly, Hats Finance provides the security researchers with decentralized dispute court (in partnership with Kleros court). Accordingly, security researchers would be more comfortable with submitting vulnerabilities on Hats protocol from a game-theory perspective with the idea that a specialized third party court will see their case if they are treated unfairly.

Is there actually statistics or case study that prove this? Also, if that’s true, considering there are also many false vulnerability reports, wouldn’t this swarm the Uniswap community especially if those reporters repetitively request for Kleros court? I assume there’s some mechanism to prevent this?

@Fav_Truffe

“Since Uniswap can use any yield-bearing token to fund the bug bounty vault, there will not be any opportunity-cost for Uniswap.”

I think we have different opinions about what is opportunity cost. Because Uniswap team can just have yield-bearing token in its treasury. In fact, Uniswap has to bear potential risk of exploit with Hats Finance, which the Hats team yourselves are aware of. It’s a good practice to defend your own of course, but just clarifying that it’s not risk free vault. And I noticed the team actually paid 40k for own, which included one high severity.

The high severity was this one which titled “First depositor can partially steal deposits and DoS vaults”
https://github.com/hats-finance/hats-contracts/pull/393

Therefore, this is a risk the Uniswap community should consider. In addition, as Uniswap is a top 5 DeFi protocol, if integrated, Uniswap will be their biggest DeFi partner, which undoubtedly would be beneficial for Hats Finance community and development. Thus, I recommend the Uniswap governance to push for fairer deals such as Hats team matching Uniswap’s contributing fund (if approved) and/or rebating the 10% payout.

[Fav_Truffe]

@Doo_StableLab

For example, using the same logic, although Hats Finance is a web3 project, the links you shared above are Medium and Twitter, which are both Web2.

Sorry, you are right. Here is the link to our dApp: https://app.hats.finance/bug-bounties

@Doo_StableLab

So once again, beside web2 vs web3 difference, the focus should be on whether there are issues with the current Uniswap bug bounty program. This will be helpful to the community to evaluate.

As for more differences; Hats Finance has an encrypted communication feature for security researchers and project teams and therefore nobody (including the Hats team) can see the vulnerability report. There is no third party risk as in the case of Immunefi.

Secondly, bug bounty vaults on Hats Finance are open to everybody. Accordingly, investors, DAO members, community members, etc. can deposit to the vault and top up the bounty amount (make it more incentivizing for security researchers).

Thirdly, Hats Finance is on-chain and therefore the submissions require a transaction fee. This fee itself is acting as a spam filter but if deemed not enough, Uniswap can increase the fee to submit a report to create a paywall (to increase the efficiency of spam filter). This is very important because its widely known that some web2 bug bounty companies are paying some security researchers to submit reports (to sell triage service to the projects).

Fourthly, Uniswap DAO can potentially farm $HAT tokens (after TGE) with its bug bounty vault.

Fifthly, there is not any monthly/quarterly/yearly fee to host the bug bounty program on Hats.

Sixthly Hats Finance, as a decentralized protocol, is anon-friendly. Considering the fact that white hatting might be troublesome in some countries and some white hats are very sensitive about their privacy, Hats has the capability to target more security researchers.

@Doo_StableLab

I assume there’s some mechanism to prevent this?

Security researcher has to pay an upfront fee to escalate the case and if the court does not agree with the security researcher, he loses this fee.

@Doo_StableLab

I noticed the team actually paid 40k for own, which included one high severity.

So, the bug bounty and audit competition are 2 different products. The high severity finding you mentioned was found at the audit competition for Hats V2 contract. For your information, the V2 contracts were already audited by 3 different centralized auditing firms prior to the competition (and we paid $160k in total for these audits). So, the finding was not at our mainnet contracts.

@Doo_StableLab

Thus, I recommend the Uniswap governance to push for fairer deals such as Hats team matching Uniswap’s contributing fund (if approved) and/or rebating the 10% payout.

Hats Finance does not charge any fees to host the bug bounty program. Therefore, Hats Finance benefits financially only after a valid vulnerability report payout.

Last but not the least, I do not want to consider Uniswap partnership as a paid promotion with all due respect.