Sky Diamond PAU v1.16

About Sky Diamond PAU v1.16

Sky implements a new facet that swaps assets 1:1 between the ALMProxies of two PAUs in a single transaction. SwapAssetFacet is bounded by directional rate limits on both PAUs and protects the initiating PAU with exact balance checks. Additionally, BeaconConfig now exposes builders for every integration, and L2BeaconSpell lets L2 governance update the integrations of a Beacon. In Version 2, the initiate rate limit keys also name the counterparty Controller, PAUFactory deploys PAUs with CREATE2, and PAUInit performs additional checks before governance onboards a new PAU.

Audit Summary

As a globally trusted security partner for decentralized finance, ChainSecurity provides security assessments of on-chain liquidity management systems and their integrations.

We greatly appreciate the opportunity to collaborate with Sky on the Diamond PAU framework again.

We have conducted a thorough review of the scope. We covered:

• Functional correctness of the swap flow across two PAUs, including the decimal conversion and the directional rate limits. No issues were found in the conversion or the rate limit accounting.
• The trust placed between PAUs, including several PAUs swapping with each other and an ALMProxy shared by several Controllers. We found that the balance checks of the initiating PAU can be satisfied with its own incoming funds. Additionally, the counterparty cannot stop accepting swaps by revoking its allocators, only by setting its rate limits to zero.
• The deployment and initialization of new PAUs in Version 2. Salts bound to the caller prevent front-running the deployment. The checks of PAUInit offer some protection against PAUs prepared maliciously before the handover to governance, but they can be bypassed and do not replace a review before onboarding.
• Correctness of the integration wiring. The refactored BeaconConfig produces the same wiring for every existing integration, and the new Swap Asset wiring does not collide with any other selector.

We provide this audit report to assist in forming an opinion on the risk profile of Diamond PAU v1.16. In summary, we find that the codebase provides a high level of security, if operated under the assumptions documented in System Overview, Trust Model and System Considerations.

It is important to note that security audits are time-boxed and cannot uncover all vulnerabilities. They complement but don’t replace other vital measures to secure a project.