How Does ‘Data Manipulation’ Specifically Affect a DeFi Lending Protocol?
In a DeFi lending protocol, data manipulation of a price Oracle can be exploited to trigger fraudulent liquidations or to under-collateralize a loan. A malicious actor could temporarily suppress the price of a borrower's collateral asset, forcing a premature liquidation.
Conversely, they could inflate the price of a borrowed asset to extract more value than they are due.
Glossar
Fraudulent Liquidations
Cause ⎊ Fraudulent liquidations occur when a derivatives position is prematurely or unfairly closed out due to manipulated or erroneous price data, rather than a genuine breach of the collateralization ratio.
Data Manipulation
Manipulation ⎊ Within cryptocurrency derivatives, options trading, and financial derivatives, manipulation signifies the deliberate distortion of market signals to achieve an unfair advantage.
DeFi Lending
Mechanism ⎊ DeFi lending operates through smart contracts that facilitate peer-to-peer or pooled borrowing and lending without traditional financial intermediaries.