What Is an Oracle Attack and How Can It De-Peg a Stablecoin?

An oracle attack involves manipulating the price data feed that a stablecoin protocol uses to value its collateral. If an attacker can trick the oracle into reporting an artificially high price for the collateral, they can borrow a large amount of the stablecoin with insufficient collateral, essentially draining the protocol's reserves.

When the true price is revealed, the protocol is left under-collateralized, leading to a massive de-peg.