How Do Decentralized Oracle Networks (DONs) Mitigate Price Feed Attacks?
DONs, like Chainlink, mitigate attacks by decentralizing the data source and the oracle mechanism itself. They aggregate price data from numerous independent, high-quality off-chain data providers.
This data is then validated and averaged by a decentralized network of nodes. The resulting multi-source, aggregated, and validated price is resistant to manipulation of any single source, making flash loan attacks on a single DEX ineffective.
Glossar
Oracle Mechanism
Attestation ⎊ Oracle mechanisms within cryptocurrency and financial derivatives function as critical bridges, verifying the integrity of off-chain data for on-chain smart contracts, particularly relevant in decentralized finance (DeFi) applications.
Flash Loan Attacks
Exploit ⎊ Flash loan attacks represent a unique vector of manipulation within decentralized finance (DeFi), leveraging the mechanics of uncollateralized lending to exploit vulnerabilities in smart contract code.
Consensus Mechanisms
Validation ⎊ Consensus mechanisms, within cryptocurrency, establish trust and secure transaction records without a central authority, fundamentally altering traditional financial infrastructure.
Economic Incentive Mechanism
Incentive ⎊ This concept describes the structured rewards or penalties embedded within a financial system to align individual actor behavior with collective network objectives.
Decentralized Oracle Networks
Architecture ⎊ Decentralized Oracle Networks (DONs) represent a robust infrastructure designed to provide reliable external data to smart contracts without relying on a single, centralized entity.
Price Feed
Feed ⎊ A price feed is a continuous stream of real-time pricing data from various sources used to determine the fair value of an asset.