Deep throat in the economic attack on mango markets

Risk monitoring and management has become a crucial part of success within the ecosystem in light of recent DeFi economic attacks on the lending industry, as reported by Cryptoslate.

In order to ensure the future growth of the space, proper procedures should be considered. This article examines the recent economic attack on Mango Markets, how it was planned, and potential defenses. We take a look at the 62 biggest events to date to understand just how vulnerable DeFi protocols are to each distinct form of risk. This involves the outright theft of users’ money as well as hacks costing hundreds of millions of dollars for bridges and algorithmic stablecoins, Cryptoslate noted.

Additionally, the current wave of financial assaults on a number of lending protocols, including Mango and Moola, has highlighted the threat this poses to the ecosystem. Additionally, the same vector was used to target many of these lending protocols. The attack used a very sophisticated technique and the attacker chose the supported collateral asset with the lowest market value and liquidity. Assets with low liquidity are most susceptible to attack via price oracle manipulation or flash lending, as reported by Cryptoslate.

We can determine how susceptible an asset is to manipulation by monitoring the liquidity available to it in decentralized exchanges. A key security aspect is a reasonable amount of cash available for the assets secured as collateral. The protocol may encounter stability issues if tokens with low liquidity are offered as collateral. Additionally, exploiting the protocol could make it easier for attackers to manipulate prices.

An attacker planning this type of attack will be primarily interested in increasing the amount of money they can borrow. This could be accomplished by pumping the asset with the low liquidity detected in order to borrow a large amount from other supported and more stable assets.

(With information from Cryptoslate)

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