MU Digital Smart Contract Audit

About MU Digital

MU Digital is building decentralized financial infrastructure on Ethereum, featuring an ERC4626-compliant vault system for token staking and yield generation. Their protocol includes a staking escrow mechanism that manages user deposits, a vault system for share-based token accounting, and a reward distributor that handles scheduled installment-based reward releases to stakers. The infrastructure enables users to stake tokens and receive proportional rewards through an automated distribution system.

Security Requirements

As MU Digital prepared to launch their staking infrastructure on Ethereum mainnet, ensuring the security of user funds and the integrity of the vault mechanics was paramount. The team engaged FailSafe to conduct a comprehensive pre-audit security review focused on their core contract suite.

The review scope encompassed critical security considerations including ERC4626 vault implementation, staking escrow operations, reward distribution scheduling, access control mechanisms, and protection against common DeFi vulnerabilities such as reentrancy, flash loan attacks, and accounting manipulation.

Audit Methodology

FailSafe's security team conducted a multi-layered audit approach combining extensive manual code review with threat modeling and automated analysis to ensure thorough coverage of potential attack vectors:

Threat Modeling

Identified critical assets including staking pools, vault shares, reward tokens, and access controls. Enumerated potential threats specific to ERC4626 vaults and time-based reward distribution systems.

Manual Code Review

Line-by-line examination of the StakingEscrow, LoAZND vault, and RewardDistributor contracts, analyzing share calculations, redemption logic, and privileged operations for vulnerabilities.

Trust Boundary Analysis

Comprehensive review of external contract interactions, particularly around vault address validation, return value verification, and asset accounting to prevent manipulation attacks.

Economic Attack Vectors

Evaluated reward distribution mechanics for potential gaming scenarios including temporary staking attacks, reward sniping, and denial-of-service through request limit exhaustion.

Confidential Partnership

In accordance with MU Digital's security and business requirements, the detailed findings and specific vulnerabilities identified during this audit remain confidential. Our partnership focused on identifying and remediating security considerations across multiple severity levels, with the development team demonstrating excellent responsiveness in implementing fixes.

The audit identified findings related to vault operations, escrow mechanics, and reward distribution logic. The majority of findings have been successfully resolved, with the team implementing improved validation patterns and access controls based on our recommendations.

Partnership Impact

Through close collaboration with MU Digital's development team, FailSafe provided comprehensive security guidance that strengthened the protocol's security posture. The engagement covered:

Enhanced vault validation to ensure only whitelisted ERC4626 vaults can be used in escrow operations, preventing malicious contract substitution
Implemented balance verification patterns to validate actual token receipts rather than trusting external return values
Strengthened reward distribution controls with admin-only tick functions and interval validation to prevent gaming scenarios
Improved redemption request handling with appropriate limits and frontend guidance to prevent operational issues

Interested in Learning More?

If you're building DeFi protocols, staking infrastructure, or ERC4626-compliant vault systems and need comprehensive smart contract security services, our team can share more about our approach and how we've helped projects like MU Digital secure their platforms.

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MU Digital Smart Contract Audit

Partnership Overview

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