In late March, a significant incident involving the ERC-20 token Nua took place. This event was a price Oracle manipulation attack, exploiting vulnerabilities in the DeFi protocol's pricing mechanism. The attacker manipulated the liquidity pool balance to distort the value of Nua, leading to substantial financial gains. This blog post will dissect the incident, highlighting the key points and concluding with the lessons learned from this attack.
Here is the verbatim discussion:
Benefit all right so into the incident first one was the newah Haack this was in late March new is a erc20 token this was a price Oracle manipulation attack this incident is publicly known by trading some usct for some Nua all right they were able to imbalance a liquidity 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 price that is more reasonable at least the market might consider more reasonable at that lower price original price uh before was lower now you've got a particular exchange though is trading it higher now because of the manipulation and you run your Nua back through that to pull usct out more now than you would have gotten because of the restored exchange rate right so another diagram of that hack you have pulled the new out to imbalance the liquidity pool you have all of that newa that you purchased at the lower price uh you put all that USD in to get that newa now of course you're running it back through this particular contract to get out more usdt than you put in and the fact $110,000 more usct than they originally put in to get $10,000 us profit.
Highlights:
Price Oracle Manipulation:
The core of the attack involved manipulating the price Oracle, which determined Nua's value based on the balance in the liquidity pool. By trading USDT for Nua, the attacker created an imbalance in the pool.
Exploiting the Law of Scarcity:
The manipulation relied on the economic principle of scarcity. By withdrawing Nua from the liquidity pool, the token's reduced supply increased its perceived value. This artificial scarcity inflated Nua's price.
Leveraging Favorable Exchange Rates:
With the inflated value of Nua, the attacker exploited the favorable exchange rate. They initially acquired Nua at a lower market price from another source. Post-manipulation, they traded Nua back into the pool to receive more USDT than they initially spent.
Profit Extraction Mechanism:
The attacker cycled their transactions through the manipulated exchange rate. By doing so, they withdrew significantly more USDT than they had originally invested. Specifically, they managed to extract $110,000 more USDT than their initial input, resulting in a net profit of $10,000.
The Nua price Oracle manipulation attack underscores the critical vulnerabilities present in certain DeFi protocols. This incident demonstrates how liquidity pool imbalances can be exploited for profit, highlighting the need for more secure and reliable price determination mechanisms. The lessons learned from this attack are crucial for developers and users alike, emphasizing the importance of enhancing the security measures within decentralized finance systems to prevent similar exploits in the future.
Speaker:
Gregory Pickett is a renowned expert in the field of cybersecurity, currently serving as the Head of Cybersecurity. With extensive experience in identifying and mitigating security threats, Pickett is recognized for his deep understanding of both offensive and defensive cybersecurity strategies.
His leadership and insights have been instrumental in safeguarding digital assets and ensuring robust security protocols across various organizations.
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