Notes from 24/2–3/3

3 min readMar 3, 2020

It’s a new month! Time truly flies

Blockchain

Vulnerabilities in Maker: Oracle-Governance Attacks, Attack DAOs, and (De)Centralization

Sketches out 2 types of attacks

MKR→CDP Exit Attack, when Dai holders realize the manipulation attack, their expectation of long-term Dai price goes to zero. The Dai market becomes a fire sale as all Dai holders try to trade for other assets. This triggers the Dai price to decrease, but doesn’t prevent the dishonest MKR holders from continuing the oracle manipulation and later trigger global settlement, realizing their gains.
MKR→Dai Exit Attack, when CDP holders realize the manipulation attack, their expectation of their share of the collateral value in a global settlement goes to zero. They rush to unlock their collateral. This can be partly blocked by MKR holders setting a higher over-collateralization threshold. To unlock collateral, CDP holders rush to buy back Dai. However, Dai holders now expect their Dai to be worth much more. The Dai market price increases to account for the extra collateral value, at which point CDP holders have already lost. The dishonest MKR holders can again continue the oracle manipulation and later trigger global settlement, realizing their gains.

It’s purely speculative so unless someone actually tries out the attack, one can’t tell for sure. But the profit margin is pretty amazing.

How Chainlink Works Under The Covers

So Kaleido joined up with Chainlink to provide an Oracle. Now this is quite a big move because you need to be able to interact with the real world!

The Blockchain Through Behavioral Analysis

Not sure where the behaviour part comes in, but it has a free dataset!

Network Effects in an Open Financial World

Excellent overview of DeFi. Still there’s a ridiculous amount of layers before it gets usable.

- Spending/Earning — (sending transactions)
- Borrowing/Lending — (Compound, MakerDao)
- Exchanging — (Uniswap, Kyber)
- Pooling for interest — (Compound, PoolTogether)
- Staking as collateral — (MakerDao)
- Saving — (Compound, Dharma)
- Trading — (Kyber, OasisDex, IDEX)
- Leverage Trading — (dy/dx, Synthetix)

Analysis of Chainlink — The Decentralised Oracle Network

Disclaimer: I’ve been personally invested in ChainLink since it was first tradable on EtherDelta, and I’m also the co-founder of a staking network for ChainLink called LinkPool. In this review I will throw my own interests aside and look at the current status of the platform critically, as that is also vital for me to keep level headed on what I’m also building.

This is where Chainlink comes in, as it boasts the following features:

No centralisation of oracles, anyone can run their oracle software and take part in the network.
On-chain smart contract based data aggregation.
Complete abstraction in types of connections to the outside world. It can support any data source. Whether that be public data sources, subscription based ones or even completely private sources.
Reputation system. Each oracle will have an on-chain identity with a reputation, giving the end-user an understanding of the quality of the oracles being used.
Penalty/Collateral system. When a Chainlink oracle accepts a request, it will put forward LINK tokens as collateral. If the oracle provides bad data, it forfeits those tokens and tarnishes its own reputation.