Part 6: Security Features and Emergency Mechanisms | by Ferdi Kurt | Coinmonks | Jun, 2025

WARNING: This smart contract has not undergone a formal security audit. Using this code in production carries significant risks. Always conduct professional security audits before deploying any smart contract to a live environment. The code is presented for educational purposes only.

In our previous articles, we explored the architecture, financial mechanisms, environmental impact tracking, tranche structuring, and governance of the GreenBonds contract. This final article focuses on the contract’s security features and emergency mechanisms, which are critical for protecting investors’ funds and ensuring the long-term viability of the bond.

The GreenBonds contract implements a multi-layered security approach that combines preventive, detective, and reactive security measures.

The contract uses OpenZeppelin’s AccessControl pattern to enforce permission restrictions:

bytes32 public constant ISSUER_ROLE = keccak256("ISSUER_ROLE");
bytes32 public constant VERIFIER_ROLE = keccak256("VERIFIER_ROLE");
bytes32 public constant TREASURY_ROLE = keccak256("TREASURY_ROLE");
bytes32 public constant UPGRADER_ROLE = keccak256("UPGRADER_ROLE");

These roles limit who can perform sensitive operations:

function addVerifier(address verifier) external onlyRole(DEFAULT_ADMIN_ROLE) {
grantRole(VERIFIER_ROLE, verifier);
}
function addTreasurer(address treasurer) external onlyRole(DEFAULT_ADMIN_ROLE) {
grantRole(TREASURY_ROLE, treasurer);
}



function addUpgrader(address upgrader) external onlyRole(DEFAULT_ADMIN_ROLE) {
grantRole(UPGRADER_ROLE, upgrader);
}

This pattern follows the principle of least privilege, ensuring that addresses only have the minimum permissions necessary for their functions.

The contract inherits from OpenZeppelin’s ReentrancyGuard to prevent reentrancy attacks:

function purchaseBonds(uint256 bondAmount) external nonReentrant whenNotPaused {
// Implementation
}
function claimCoupon() external nonReentrant whenNotPaused {
// Implementation
}
function redeemBonds() external nonReentrant whenNotPaused {
// Implementation
}

The nonReentrant modifier ensures that these functions cannot be called recursively, preventing potential attack vectors when transferring tokens.

The contract implements a circuit breaker (pause/unpause) that can halt operations in case of emergencies:

function pause() external onlyRole(DEFAULT_ADMIN_ROLE) {
_pause();
}
function unpause() external onlyRole(DEFAULT_ADMIN_ROLE) {
_unpause();
}

This is further enforced by the whenNotPaused modifier on critical functions:

function purchaseBonds(uint256 bondAmount) external nonReentrant whenNotPaused {
// Implementation
}

As discussed in the previous article, the contract implements a timelock mechanism for sensitive operations:

mapping(bytes32 => uint256) public operationTimestamps;
uint256 public constant TIMELOCK_PERIOD = 2 days;
mapping(bytes32 => bool) public isOperationExecuted;

This provides a delay between scheduling and executing critical changes, allowing stakeholders to monitor and react if necessary:

function checkAndScheduleOperation(bytes32 operationId) internal returns (bool) {
if (isOperationExecuted[operationId]) {
revert OperationAlreadyExecuted();
}
if (operationTimestamps[operationId] == 0) {
scheduleOperation(operationId);
return false;
}
if (block.timestamp < operationTimestamps[operationId]) {
revert TimelockNotExpired();
}
isOperationExecuted[operationId] = true;
return true;
}

The timelock mechanism:

1. Prevents replay attacks by tracking executed operations
2. Schedules operations if they haven’t been scheduled yet
3. Validates that the timelock period has expired
4. Marks operations as executed to prevent re-execution

The contract uses OpenZeppelin’s SafeERC20 library to safely interact with ERC20 tokens:

using SafeERC20 for IERC20;
// ...
paymentToken.safeTransferFrom(msg.sender, address(this), cost);

Additionally, it implements a safeTransferTokens function to handle edge cases like insufficient balance:

function safeTransferTokens(address recipient, uint256 amount) internal returns (uint256) {
uint256 availableBalance = paymentToken.balanceOf(address(this));
// Ensure we don't try to transfer more than available
uint256 transferAmount = amount;
if (transferAmount > availableBalance) {
transferAmount = availableBalance;
}
// Transfer tokens
paymentToken.safeTransfer(recipient, transferAmount);
return transferAmount;
}

This function:

1. Checks the actual available balance
2. Adjusts the transfer amount if necessary
3. Only performs the transfer if the amount is positive
4. Returns the actual amount transferred

The contract uses Solidity’s unchecked blocks to optimize gas costs while maintaining safety:

// Calculate time since last claim
uint256 timeSinceLastClaim;
if (block.timestamp <= lastClaim) {
return 0;
} else {
// Using unchecked since block.timestamp > lastClaim is already verified
unchecked {
timeSinceLastClaim = block.timestamp - lastClaim;
}
}

This is only done in cases where the logic ensures overflow/underflow cannot occur, such as after explicit checks that one value is greater than another.

The contract implements a structured treasury system to ensure funds are properly segregated and managed:

struct Treasury {
uint256 principalReserve;  // For bond redemption
uint256 couponReserve;     // For coupon payments
uint256 projectFunds;      // For green project implementation
uint256 emergencyReserve;  // For unexpected expenses
}
Treasury public treasury;

When bonds are purchased, funds are automatically allocated to different treasury components based on configurable percentages:

// Allocation percentages in basis points (e.g., 4500 = 45%)
uint256 public principalAllocationBps;
uint256 public projectAllocationBps;
uint256 public emergencyAllocationBps;

The contract includes fund withdrawal with categorization:

function withdrawProjectFunds(
address recipient, 
uint256 amount, 
string memory category
) external onlyRole(TREASURY_ROLE) nonReentrant whenNotPaused {
if (recipient == address(0)) revert InvalidValue();
if (amount == 0) revert InvalidValue();
if (bytes(category).length == 0) revert EmptyString();
if (amount > treasury.projectFunds) revert InsufficientFunds();
updateTreasury(
0,              // Principal reserve (no change)
0,              // Coupon reserve (no change)
-int256(amount), // Deduct from project funds
0               // Emergency reserve (no change)
);
// Transfer funds
safeTransferTokens(recipient, amount);
emit FundWithdrawal(recipient, amount, category, block.timestamp);
}

This function:

1. Validates the withdrawal parameters
2. Requires a category for better tracking
3. Updates the treasury state before external interactions
4. Transfers the funds using the safe transfer mechanism
5. Emits an event with categorization for transparency

The contract provides a function to check the current treasury status:

function getTreasuryStatus() external view returns (
uint256 principalReserveResult,
uint256 couponReserveResult,
uint256 projectFundsResult,
uint256 emergencyReserveResult,
uint256 totalBalanceResult
) {
return (
treasury.principalReserve,
treasury.couponReserve,
treasury.projectFunds,
treasury.emergencyReserve,
paymentToken.balanceOf(address(this))
);
}

This function returns both the internal accounting values and the actual token balance for verification and reconciliation.

The contract includes several emergency mechanisms to handle exceptional circumstances.

Emergency Recovery

An emergency recovery function allows the admin to recover funds even when the contract is paused:

function emergencyRecovery(address recoveryAddress, uint256 amount) 
external 
nonReentrant 
onlyRole(DEFAULT_ADMIN_ROLE) 
{
if (recoveryAddress == address(0)) revert InvalidValue();
if (amount == 0) revert InvalidRecoveryAmount();
bytes32 operationId = keccak256(abi.encodePacked("emergencyRecovery", recoveryAddress, amount));
if (checkAndScheduleOperation(operationId)) {
uint256 transferAmount = safeTransferTokens(recoveryAddress, amount);
emit EmergencyRecovery(recoveryAddress, transferAmount);
emit OperationExecuted(operationId);
}
}

This function is protected by:

1. The DEFAULT_ADMIN_ROLE restriction
2. The timelock mechanism with replay protection
3. Input validation

Issuer Emergency Withdrawal

A separate emergency withdrawal function is available for the issuer, specifically targeting the emergency reserve:

function issuerEmergencyWithdraw(uint256 amount) 
external 
onlyRole(ISSUER_ROLE) 
nonReentrant 
{
if (amount == 0) revert InvalidValue();
bytes32 operationId = keccak256(abi.encodePacked("emergencyWithdraw", amount));
if (checkAndScheduleOperation(operationId)) {
if (amount > treasury.emergencyReserve) revert InsufficientFunds();
updateTreasury(
0,               // Principal reserve (no change)
0,               // Coupon reserve (no change)
0,               // Project funds (no change)
-int256(amount)  // Deduct from emergency reserve
);
safeTransferTokens(msg.sender, amount);
emit FundWithdrawal(msg.sender, amount, "Emergency Withdrawal", block.timestamp);
emit OperationExecuted(operationId);
}
}

This function:

1. Is restricted to addresses with the ISSUER_ROLE
2. Is protected by the timelock mechanism
3. Only allows withdrawals from the emergency reserve
4. Updates the treasury state before transferring funds
5. Emits events for transparency

The contract supports early bond redemption with a configurable penalty:

function setEarlyRedemptionParams(bool enabled, uint256 penaltyBps) 
external 
onlyRole(ISSUER_ROLE) 
whenNotPaused 
{
if (penaltyBps > 5000) revert InvalidValue(); // Maximum 50% penalty
uint256 oldPenaltyBps = earlyRedemptionPenaltyBps;
earlyRedemptionEnabled = enabled;
earlyRedemptionPenaltyBps = penaltyBps;
emit EarlyRedemptionStatusChanged(enabled);
emit EarlyRedemptionPenaltyUpdated(oldPenaltyBps, penaltyBps);
}
function redeemBondsEarly(uint256 bondAmount) external nonReentrant whenNotPaused {
if (!earlyRedemptionEnabled) revert EarlyRedemptionNotEnabled();
if (bondAmount == 0 || bondAmount > balanceOf(msg.sender)) revert InvalidBondAmount();
uint256 redemptionValue = bondAmount * faceValue;
uint256 penalty = redemptionValue * earlyRedemptionPenaltyBps / 10000;
// Calculate prorated coupon
uint256 proRatedCoupon = calculateClaimableCoupon(msg.sender);
processBondRedemption(
bondAmount,
faceValue,
proRatedCoupon,
msg.sender,
false,      // Not a tranche
0,          // Tranche ID (not used)
true,       // Is early redemption
penalty     // Penalty amount
);
}

This mechanism:

1. Allows the issuer to enable/disable early redemption
2. Sets a penalty percentage (capped at 50%)
3. Calculates the penalty based on the redemption value
4. Processes the redemption with the penalty deducted

The contract uses the UUPS (Universal Upgradeable Proxy Standard) pattern for upgradability:

contract UpgradeableGreenBonds is 
Initializable, 
AccessControlUpgradeable, 
ReentrancyGuardUpgradeable,
PausableUpgradeable,
ERC20Upgradeable,
UUPSUpgradeable
{
// Contract implementation
}
function _authorizeUpgrade(address newImplementation) internal override onlyRole(UPGRADER_ROLE) {
// No additional validation needed beyond the role check
}

This pattern:

1. Allows the contract logic to be upgraded while preserving state
2. Restricts upgrade authority to addresses with the UPGRADER_ROLE
3. Uses an initializer instead of a constructor to set up the contract

The version function provides transparency about the current implementation:

function version() external pure returns (string memory) {
return "v1.0.0";
}

The contract emits detailed events for transparency and off-chain tracking:

event BondPurchased(address indexed investor, uint256 amount, uint256 tokensSpent);
event CouponClaimed(address indexed investor, uint256 amount);
event BondRedeemed(address indexed investor, uint256 amount, uint256 tokensReceived);
event ImpactReportAdded(uint256 indexed reportId, string reportURI);
event ImpactReportVerified(uint256 indexed reportId, address verifier);
// Additional events...

These events:

1. Include indexed parameters for efficient filtering
2. Capture critical state changes
3. Record value transfers with better categorization
4. Document governance actions

The contract implements several security best practices:

The contract updates state variables before making external calls to prevent reentrancy attacks:

// Update state 
tranche.holdings[msg.sender] -= amount;
tranche.holdings[to] += amount;
// Update coupon claim date for receiver
if (tranche.lastCouponClaimDate[to] == 0) {
tranche.lastCouponClaimDate[to] = block.timestamp;
}
emit TrancheTransfer(trancheId, msg.sender, to, amount);

Functions include input validation:

function withdrawProjectFunds(
address recipient, 
uint256 amount, 
string memory category
) external onlyRole(TREASURY_ROLE) nonReentrant whenNotPaused {
if (recipient == address(0)) revert InvalidValue();
if (amount == 0) revert InvalidValue();
if (bytes(category).length == 0) revert EmptyString();
if (amount > treasury.projectFunds) revert InsufficientFunds();
// Implementation...
}

The contract uses custom error types for gas efficiency and clarity:

error BondMatured();
error BondNotMatured();
error InsufficientBondsAvailable();
error InvalidBondAmount();
error NoCouponAvailable();
error OperationAlreadyExecuted(); // New error for enhanced timelock
// Additional errors...

Functions are given the minimum required visibility:

function safeTransferTokens(address recipient, uint256 amount) internal returns (uint256) {
// Implementation...
}
function calculateTimeBasedInterest(/* parameters */) internal view returns (uint256) {
// Implementation...
}

The GreenBonds contract incorporates security features and emergency mechanisms to protect investor funds, ensure reliable operations, and handle exceptional circumstances. By implementing role-based access control, reentrancy protection, circuit breakers, timelocks, and structured treasury management, the contract provides a robust foundation for green bond issuance.

These security features are complemented by the governance system and upgrade mechanism, creating a flexible yet secure framework that can adapt to changing requirements while maintaining the integrity of the bond issuance.