Formal Analysis of Composable DeFi Protocols

Palina Tolmach, Yi Li, Shang-Wei Lin, and Yang Liu

In Proceedings of the 1st Workshop on Decentralized Finance (DeFi), 2021

Abstract: Decentralized finance (DeFi) has become one of the most successful applications of blockchain and smart contracts. The DeFi ecosystem enables a wide range of crypto-financial activities, while the underlying smart contracts often contain bugs, with many vulnerabilities arising from the unforeseen consequences of composing DeFi protocols together. In this paper, we propose a formal process-algebraic technique that models DeFi protocols in a compositional manner to allow for efficient property verification. We also conduct a case study to demonstrate the proposed approach in analyzing the composition of two interacting DeFi protocols, namely, Curve and Compound. Finally, we discuss how the proposed modeling and verification approach can be used to analyze financial and security properties of interest.

Cite:

@inproceedings{Tolmach2021FAC,
  author = {Tolmach, Palina and Li, Yi and Lin, Shang-Wei and Liu, Yang},
  booktitle = {Proceedings of the 1st Workshop on Decentralized Finance (DeFi)},
  month = mar,
  pages = {149--161},
  publisher = {Springer Berlin Heidelberg},
  title = {Formal Analysis of Composable {DeFi} Protocols},
  year = {2021}
}