How oracle manipulation attacks work; Avraham Eisenberg claims its legal

Please fol­low and like us:
Pin Share

 Ora­cles are a vital aspect of DeFi pro­to­cols — their role of pro­vid­ing off-chain data that is inputted on-chain to enable the smooth run­ning of smart con­tracts makes them very important.

In its sim­ple descrip­tion, Ora­cles con­nect blockchains to each oth­er with an aim of cross-com­mu­ni­ca­tion and exchange of nec­es­sary data. This data can take the form of live aggre­ga­tion of asset prices that need to be fed into DEXes. 

As impor­tant as ora­cles, that there has been a spike in the num­ber of attacks launched against ora­cles. Due to 41 of these attacks also known as Ora­cle Manip­u­la­tion Attacks, DeFi pro­to­cols 2022 lost $386.2 mil­lion accord­ing to data from Chainalysis.

Dynamics of Oracle Manipulation Attacks

While the major­i­ty of attacks ini­ti­at­ed on DeFi pro­to­cols explore a weak point or a vul­ner­a­bil­i­ty in the struc­ture, Ora­cle Manip­u­la­tion Attacks are launched dif­fer­ent­ly. Attack­ers manip­u­late the prices of assets com­ing from ora­cles by attack­ing the ora­cles feed­ing DeFi protocols.

In addi­tion, Chainal­y­sis not­ed that this attack can also involve the use of large amounts of cryp­tocur­ren­cy to quick­ly trade tokens with low liq­uid­i­ty on cer­tain DeFi pro­to­cols so that the price can be altered but is not reflect­ed in the open market. 

In a sit­u­a­tion where the attack­er lacks enough mon­ey to trade the token, they use flash loans and when the price of the token is high enough,  “the attack­er can then exchange their arti­fi­cial­ly inflat­ed hold­ings for oth­er tokens with greater liq­uid­i­ty and a more con­sis­tent val­ue”. For oth­ers, instead of exchang­ing the token, they bor­row mon­ey while using the tokens as col­lat­er­al, with no plans to pay back.

Avraham Eisenberg argues that oracle manipulation attacks are legal 

There is a debate in the cryp­to indus­try argu­ing that Ora­cle manip­u­la­tion attacks are legal and trad­er Avra­ham Eisen­berg, who used the pro­ce­dure on the Man­go Mar­kets pro­to­col, a DEX on Solana, is one of the most pop­u­lar pro­po­nents of this. 

Avra­ham argues that he sees the pro­ce­dure he ini­ti­at­ed on the Man­go Mar­kets as a “prof­itable trad­ing strat­e­gy” which made the pro­to­col to lose $117 mil­lion dur­ing the attack in Octo­ber 2022. Since the attack, he has been bold to appear on shows such as Lau­ra Shin’s pop­u­lar Unchained Pod­cast where he talked about his stance on such attacks.

In response to all of Avraham’s claims, charges have been filed against him by the SEC and CFTC for mar­ket manip­u­la­tion. Chainal­y­sis also not­ed that Man­go Mar­kets sued the attack­er for engag­ing in unlaw­ful on its plat­form and with the Man­go DAO.

Read also;

The rise of OFAC sanc­tions & the impact on the cryp­to industry

Over­all mix­er usage falls in 2022, but illic­it usage hits all-time high – Chainalysis

Source link

Please fol­low and like us:
Pin Share

Leave a Reply

Your email address will not be published. Required fields are marked *