Locale Network Security Audit

This repository contains the public summary of the third party security audit performed by K42 Auditz for the Locale Network loan pool and lending platform. The audit reviewed the codebase for correctness, safety, and resistance to manipulation across the full technical stack.

Auditor Information

Auditor: K42 Auditz Role: Independent smart contract and Web3 security auditor Scope: Loan pool contracts, Cartesi DApp computation logic, lending platform TypeScript services, and system level interaction points Audit Duration: 5 day review window Artifacts Reviewed: Solidity contracts, Cartesi DApp source files, TypeScript service layer, frontend components, data flow between off chain and on chain logic

What the Audit Covers

1. Smart Contract Review

The audit includes a full analysis of the SimpleLoanPool.sol contract, focusing on:

• Loan creation and activation logic
• Repayment mechanisms
• Access control roles
• State updates and fund management
• Reentrancy risks
• Flash loan resistance

2. Cartesi DApp Review

The audit evaluates the Cartesi components that perform off chain interest rate and debt service calculations:

• debt.ts financial computation logic
• index.ts request handling and data validation
• Statistical risk surface created through transaction history inputs
• Handling of off chain to on chain communication

3. Lending Platform Review

The audit reviews the TypeScript and frontend services that interface with the blockchain and Cartesi DApp:

• Transaction submission logic
• Error handling patterns
• Input validation
• UI behavior during failed or invalid operations

4. Risk Classification and Findings

The report documents findings categorized as:

• High severity
• Medium severity
• Low severity
• Informational
• Gas optimizations

Each issue includes a description of the risk, proof of impact, reproduction context, and recommended fixes. All identified issues have been resolved.

5. Key Technical Themes Evaluated

The paper focuses on several central security themes:

• Manipulation resistance in financial calculations
• Floating point accuracy issues in TypeScript
• Access control soundness
• Oracle and off chain data integrity
• Safe state updates for repayment logic
• Proper checks effects interactions patterns
• Precision handling for large loan amounts

Status

All vulnerabilities identified in the audit have been addressed. The codebase has undergone remediation and verification to reflect the recommendations provided by K42 Auditz.

Full Report

The complete audit PDF is included in this repository for reference.