What is Oracle Manipulation?
Let's find out Oracle Manipulation meaning, definition in crypto, what is Oracle Manipulation, and all other detailed facts.
Oracle manipulation (also known as price manipulation) is a typical occurrence in the DeFi ecosystem when hackers alter the oracle smart contract which leads to theft, system failure, and so on.
Oracles are third-party service providers that offer blockchains with real-world or external information such as statistics, price fees, weather information, and so on. Price fees, however, are by far the most exploited oracle data since they enable attackers to take over millions of funds from DeFi platforms.
As an example, the offender in the Harvest Finance attack was able to infiltrate its pools via a flash loan using a type of oracle manipulation. Essentially, the hacker used a transaction to lower the value of USDC inside the Curve pool. The offender then entered the Harvest pool at the deflated price, returned USDC to its original price, reversed his transaction, and departed the pool at a much higher price.
Overall, there are two distinct ways an oracle could collect price data. One is to effortlessly drain price information via APIs from centralized exchanges. Another way is for oracles to do calculations independently by consulting decentralized exchanges (DEXs). Nonetheless, both techniques have some benefits and drawbacks, as well as ways and methods to be hacked or manipulated.
According to DeFi networks, they have lost over $33 million as a result of oracle manipulations in 2020 alone.