A new report from Binance Research says that exploits involving oracle networks have caused nearly a billion dollars in losses over the past three years.
Oracles connect blockchains to external data allowing smart contracts to perform tasks based on real-world events or conditions.
Decentralized finance protocols (DeFi) use oracles to retrieve the market price of assets, which can determine whether or not a platform should facilitate a particular transaction.
However, Binance Research says that real-world data from different sources varies, which poses reliability issues and makes systems that rely on oracles vulnerable to tampering.
Says Binance Research,
“Malicious actors can exploit this weakness to distort price feeds and quickly drain a platform of funds. Prominent examples of such exploits include the Mango Markets breach last year and the more recent attack on EraLend in July this year.”
According to the report, an estimated $892 million has been exploited due to oracle-related manipulations since 2020.
“In many cases, actors drive up the prices of low-liquidity tokens through targeted protocols before exchanging their artificially inflated tokens for other tokens, or using them as collateral to make loans in the credit markets.”
According to the report, the total value of hacked oracle-related exploits increased from $65 million in 2020 to $399.1 million in 2021. The amount of losses peaked at $403.2 million in 2022 before dropping to $25. $4 million by 2023.
Binance Research also says two factors are driving the decline in oracle-related exploits this year.
“The amount lost due to oracle-related exploits has declined significantly in 2023, likely driven by a combination of increased focus on security and a broad decline in DeFi TVL (total value locked).”
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