# Users can take advantage of low liquidity markets to inflate the interest rate

Attacker supplies/borrows 1 wei in a Morpho Blue market, driving utilization to 100% so AdaptiveCurveIrm inflates rates, creating un-clearable bad debt and share-inflation losses.

- Payout: Contest reward
- Severity: medium
- Program: Morpho Blue
- Credited: MiloTruck
- Disclosed: 2024-09-28
- Write-up quality: 7/10
- Original: https://cdn.cantina.xyz/reports/cantina_competition_morpho_blue_dec2023.pdf#3.2.8
- Library page: https://bugbountylibrary.com/r/cantina%3Amorpho_blue_dec2023%3A3.2.8
- Tags: domain:web3 impact:funds-loss impact:integrity kind:contest platform:cantina sev:medium tech:evm tech:solidity technique:source-review vuln:business-logic vuln:oracle-manipulation vuln:precision-loss

**Target:** Morpho Blue lending market with AdaptiveCurveIrm
**Root cause:** _accrueInterest always calls the stateful IRM's borrowRate() even when totalSupplyAssets is dust, so a 1-wei supply/borrow yields 100% utilization and the IRM aggressively raises rates that compound exponentially.
**Steps:**
1. Create market with legitimate tokens/oracle and AdaptiveCurveIrm enabled.
2. `supply(1)` wei of loanToken and `supplyCollateral(2)` wei.
3. `borrow(1)` wei so utilization = 100%.
4. Loop 150 days calling `accrueInterest()`; interest compounds via wTaylorCompounded.
5. `liquidate` attacker position; half of totalBorrowAssets remains as bad debt due to virtual shares.
6. `supply(1_000_000e6)` now rounds shares down to 0, losing depositor funds.
**How found:** Code reading of _accrueInterest and AdaptiveCurveIrm._borrowRate revealed the IRM is called unconditionally regardless of market size, prompting the 1-wei utilization hypothesis and PoC.
**Exploitation:** Attacker seeds a market with 1 wei supply/borrow to force 100% utilization, waits while interest compounds exponentially, then liquidates own position; residual bad debt persists and share-to-asset ratio inflates so later suppliers receive zero shares.
**Escalation:** Exponential compounding over time amplifies bad debt and permanently distorts the market's interest rate, harming subsequent lenders/borrowers.
**Insight:** Stateful interest-rate models that read utilization can be gamed at dust scale: check whether rate updates are gated on minimum market size, and test share/asset rounding at extreme ratios.