Oracles in Decentralized Finance: Attack Costs, Profits and Mitigation Measures

Aspembitova, Ayana T.; Bentley, Mark

doi:10.3390/e25010060

Cited by 6 publications

(2 citation statements)

References 25 publications

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“…Ethereum, sometimes considered the first blockchain of the second generation, was the first to propose the concept of smart contracts. Smart contracts are programmable agreements automatically carrying out predetermined activities when satisfying specific criteria (Aspembitova & Bentley, 2023). Smart contracts allowed for the development of decentralized apps (DApps) and decentralized autonomous organizations (DAOs), which broadened the scope of blockchain technology beyond the simple transfer of wealth.…”

Section: Evolution Of Blockchain Technologymentioning

confidence: 99%

<strong>The Rise of DeFi: Transforming Traditional Finance with Blockchain Innovation</strong>

Ahmed

2024

Preprint

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The emergence of decentralized finance (DeFi) signifies a fundamental change in the financial sector, utilizing blockchain technology to revolutionize conventional financial structures. This study aims to investigate the development, underlying principles, and practical applications of DeFi while analyzing the regulatory factors, upcoming patterns, and policy consequences. This study employs a thorough research methodology encompassing a literature review and case studies to examine the fundamental elements, uses, and instances of success in DeFi. It emphasizes the potential for transformation and the obstacles it faces. The study identified legal ambiguity, difficulties in achieving scale, and constraints related to compliance as primary concerns for policymakers. The fundamental discoveries encompass the pivotal function of blockchain technology in facilitating DeFi platforms, the tangible implementations of DeFi in lending, borrowing, and trading, and the necessity for clear regulations and global cooperation. The policy implications encompass the significance of maintaining a balance between innovation and compliance, promoting international collaboration, and prioritizing consumer protection measures. In summary, this study enhances our comprehension of the emergence of DeFi and its consequences for conventional finance. It offers valuable insights for policymakers, industry participants, and scholars in effectively navigating the changing realm of decentralized finance.

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Section: Evolution Of Blockchain Technologymentioning

confidence: 99%

<strong>The Rise of DeFi: Transforming Traditional Finance with Blockchain Innovation</strong>

Ahmed

2024

Preprint

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“…The evaluation of relevant DeFi performance metrics related to the valuations of DeFi protocols; investigating how these valuations depend on values such as total value locked (TVL), protocol income, total income, trading volume, and inflation factor (see for example [3] and the included rich review); • Security against attacks on decentralized trust-based oracles function [4], especially in cases when one protocol uses the oracle function of another protocol, such as the usage of Chainlink [5,6] and Oraclize [7];…”

mentioning

confidence: 99%

The Method of Choosing Parameters for Margin Trading Protocols in the Constant Product Model

Kovalchuk,

Kostanda,

Marukhnenko

et al. 2023

Mathematics

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We introduce a new method of choosing parameters for margin trading protocols in the Constant Product Model and apply it to our new DeFi Margin Trading protocol Primex, which can work with different DEXs and DeFi platforms. The main advantages of Primex, in comparison with existing DeFi protocols, are the following: (1) the possibility to trade with leverage, using large asset amounts and having only a small part (deposit) in one of the assets; (2) full explanation and justification of the choice of protocol parameters and relations (such as liquidation condition, maximum leverage, different fees, etc.), which allows to estimate different risks (for Lenders and the protocol) and reduce them to the required level; (3) additional decentralization and, at the same time, protection against different faults in protocol functioning, achieved by the usage of the decentralized Keeper; (4) transparent rules and conditions for all participants—Lenders, Traders, and Keepers. We give a detailed explanation for our approach to set protocol parameters and build a corresponding method to obtain their numerical values in the case of the Constant Product Model. The obtained numerical results provide additional indirect confirmation of the consistency of our method. Note that it also may be applied (after the corresponding recalculation of some coefficients) to other models, such as the Order Book Model, Constant Sum Model, or the Mixed Constant Sum/Constant Product Model (as described in the Curve whitepaper), and even other types of DeFi protocols after some modification.

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