Velvet audit competition- Rewards up to $56K in USDT name

6 min readJun 18, 2024

Starting June 20, 2024, at 15:00 GMT to July 4th, 2024, at 15:00 GMT

We invite all white hat hackers to join the hunt for the Velvet audit competition.

All experience levels are welcome; whether you are a seasoned security veteran or an amateur, show us what you’ve got! Prizes will be given based on the severity level of each vulnerability found.

About the Competition

Starting June 20, a new vault will open in the Hats dApp — “Velvet”.
Participants can check the scope of the contracts and start searching for bugs.

Velvet intro

Velvet.Capital is an innovative DeFi platform dedicated to democratizing access to digital asset management. Velvet’s mission is to provide individuals and institutions with the tools and resources to create and manage DeFiportfolios and structured products easily and securely. By leveraging Velvet Capital’s infrastructure, empowers users to build diversified portfolios, earn yield, and participate in the growing decentralized finance ecosystem without the complexities associated with traditional on-chain portfolio management.

Audit competition details

The competition code language is Solidity and the SLOC estimation for this competition is ~3100 SLOC.

This competition is hosted on Binance for more efficient fee management.

Stay up-to-date with the competition, chat with the team, and get your questions answered by joining the dedicated Discord channel on the Hats server.
All audit reports will be published in our Discord on the day of the competition. Don’t miss the latest updates and insights — join now and be the first to know!

Audit competition rewards

Deposited Amount: The deposited amount is ~$70K in USDT, making the available prize pool ~$56K in USDT.
Service Fee: All rewards mentioned in this article and on the Hats dApp UI have already deducted a 20% Hats service fee.
Severities: Low, Medium, High.

Rewards and calculation
For our audit competition, the entire prize pool is up for grabs across all severity levels. Each severity level has a designated point value and a maximum payout cap.

Maximum Reward Caps per Submission:

Low Severity: 400 USDT (equals 1 point)
Medium Severity: 4000 USDT (equals 10 points)
High Severity: 12,800 USDT (equals 32 points)

*For simplicity, there is a relation between the points and the cap. If the cap is 400 USDC, it equals 0,71% of the total maximum rewards.

Points are consistently awarded within the same severity level unless the committee decides to adjust this. For instance, both the first and second low-severity findings will earn 1 point each. This standard applies to medium and high severities as well.

Calculating the Winner’s Reward:

The formula for a winner’s reward is as follows:

Point Value = Prize Pool / Total Points*

*Awarded for the entire competition

Examples for Clarity:

Example #1:

163 Low Severity: 163 points
1 Medium Severity: 10 points
1 High Severity: 32 points

Total points: 205

In this scenario:

Value of 1 Point = 56,000 USDC/205 Total points = 273.17 USDT
The rewards for this example will be as follows:
Low (163 points): $273.17 USDT each
Medium (10 points): $2731.7USDT in total.
High (32 points): $8741.44 USDT in total.

Example #2

10 Low Severity: 10 points
1 Medium: 10 points

Total points: 20

In this scenario:

Value of 1 Point = 56,000 USDC/20 Total points = 2800 USDT
The results exceed the max reward per low severity, so the value of a point is adjusted.

The rewards for this example will be as follows:

Low (10 points): $2800 each -> $400 USDT
Medium (10 points): $28,000 -> $4000 USDT

Severities

High Severity

Issues that will qualify for this bracket will be assigned 32 points.

High-severity vulnerability description:

For a submission to be considered a HIGH-risk vulnerability, issues must:

Direct theft of any user funds, whether at rest or in motion
Long-term freezing of user funds
Theft or long-term freezing of unclaimed yield or other assets
Protocol insolvency

Medium Severity

Issues that will qualify for this bracket will be assigned 10 points.

Medium severity vulnerability description:

Issues that lead to an economic loss but do not lead to direct loss of on-chain assets. Examples are:

Gas griefing attacks (make users overpay for gas)
Attacks that make essential functionality of the contracts temporarily unusable or inaccessible
Short-term freezing of user funds

Low severity

Issues that will be qualified for this bracket will be assigned with 1 point.

Low severity vulnerability description:

Issues where the behavior of the contracts differs from the intended behavior (as described in the docs and by common sense), but no funds are at risk.

Limitations

Reporters will not receive a bounty for any known issue, such as:

Issues mentioned in any previous audit reports
Vulnerabilities that were already made public (either by HATs or by a third party)
“Centralization risks” that are known and/or explicitly coded into the protocol (e.g. an administrator can upgrade crucial contracts and steal all funds)
Attacks that require access to leaked private keys or trusted addresses
Issues/contracts mentioned in the out-of-scope section

Submission Guidelines — High/Medium/Low severities:

General Information:

The Hats team will create a new repository called “Velvet] audit competition” under the Hats.finance organization on GitHub. The repository will be kept private until the competition starts. Hats bot will fork it on the first submission. To participate, security researchers must submit their findings on-chain, and an automatic GitHub issue will be generated in the forked repository.
How it Works: Video Explanation

SUBMISSION GUIDELINES:

Submissions should be made using our Dapp.
You can submit one on-chain submission mentioning all issues found on the repo.
All new submissions will be created on Hats forked repo on Hats: Hats GitHub

Report Format:

Please send a plain ASCII description in the following format:
[TITLE]: A short description of the issue.
SEVERITY: Either High, Medium, or Low (as per the rules).
Submission should contain at least one test demonstrating the problem and, if possible, a possible fix.

Report Template:

Description: Describe the context and the effect of the vulnerability.
Attack scenario: Describe how the vulnerability can be exploited.

Attachment:

Proof of Concept (PoC) File: Provide a file containing a proof of concept (PoC) that demonstrates the vulnerability.
Revised Code File (Optional): If possible, provide a second file containing the revised code that offers a potential fix for the vulnerability. This file should include:
Comment with a clear explanation of the proposed fix.
The revised code with suggested changes.
Add any additional comments or explanations clarifying how the fix addresses the vulnerability.
Recommendation: Describe a patch or potential fix for the vulnerability.

Due to the nature of the audit competition mechanism, the report will not be encrypted.

Evaluation:

The first participant to submit an issue following guidelines gets a bounty for that issue (issues already received or out of scope will not receive a reward).
The competition starts on June 20 at 15:00 GMT and ends on July 5th at 15:00 GMT.
Issues that we are aware of (as witnessed by any open issues in the repository) will not be eligible for the bug bounty.

Compensation and Impact

A prize pool of ~$56K USDT and NFT rewards from our hacker collection will be distributed among security researchers who submit eligible vulnerability disclosures.

Compensation payment timeline:

Up to Ten days after the competition ends, we will announce a winner list.
Alongside the winner announcement post, submitters can send disputes to the committee team and request clarification. They can also involve the Hats security team in the process. The goal is to facilitate honest and professional debate regarding disputed submissions.
Between 7–14 days after the announcement, we will publish a split contract where the winners can claim their rewards.
HATS Service Fee: A 20% deduction from the payout will always be allocated as the service fee.

Security researchers play a crucial role in fostering trust and confidence in Web3 technologies, paving the way for mass adoption. By participating in this competition, security researchers can gain recognition for their work, raise their profile, and make valuable connections in the Web3 security ecosystem. Ultimately, they can contribute to creating a more secure and equitable community.

Join the Velvet Audit Competition today and participate in the movement to secure the future of Web3 and decentralized finance. Check the Hats Finance dApp for more information and in-scope contracts.

Stay tuned and check Hats dApp:https://app.hats.finance/audit-competitions