This blog delves into two critical aspects of decentralized finance (DeFi) security: the manipulation of liquidity pools and the importance of proper validation in algorithmic decision-making. By examining a specific case of liquidity pool exploitation and discussing the risks associated with improper parameter validation, we aim to highlight the vulnerabilities and necessary safeguards in DeFi systems.

Here is the verrbatim discussion:

Pool now this particular price Oracle was using the balance in the liquidity pool to determine the price right so if you have less of one token on one side say you put your usdt in there and you take out your Nua you have less Nua and according to the law of scarcity Nua being more scarce is more valuable right that by pushing USD into that pool you pull no out NOA becomes more uh valuable right you distorted that exchange rate in that instance and then of course if you have a very favorable exchange rate at that point in time right if you have new already you can then trade that in other direction to get more USD than you normally would have if right that pricing orle was that manipulatable right it was basing uh the price based on just that liquidity pool bounce this happened to be a case just like that someone put usct in took out the NOA due to the law of scarcity new is now more valuable value of newa goes up if you happen to get newa at the going rate from another source right for the pricethat in fact I believe there's one of those this week uh improper validation and logic errors anytime that you have algorithmic decision-making there are parameters involved that are considered in order to make that decision if they are not properly validated and sanitized then decisions can be made to the attacker's favor right um or if there's logic errors maybe the um parameters have been validated but there's a certain combination of parameters that produce a decision that again is not to um the owner benefit or to the users of the contract in a fair way but in fact our unfair way result unfair resolve to the attacker those types of attacks quite common someone uh discovers a combination that works just right right gives the right result for the attacker that they want or Mev attacks now I've heard that expanded two different ways minor.