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After Mango Markets exploit: Compound pauses 4 tokens to protect against price manipulation

 


The decentralized lending protocol Compound has suspended four tokens as collateral on its platform to protect users from potential price manipulation-related attacks, similar to the recent exploit at Mango Markets, where $117 million was stolen. That's according to a proposal on Compound's governance forum that was recently adopted


The proposal was approved on October 25 with 99 percent of all votes. It says:


“An oracle manipulation attack like the one that took place at Mango Markets where $117 million was stolen is much less likely at Compound because the collateral is much more liquid than at MNGO and Compound requires overcollateralization of the loans. Yes as a precaution, we propose pausing the above assets given their relative liquidity profiles."

In a security review at Compound v2 in September , the Volt Protocol team identified potential market manipulation risks related to tokens exhibiting low liquidity. The report says: 


“The attack is possible when the amount of a token that can be borrowed on markets like Aave and Compound is large compared to the liquid market. The most notable example is ZRX, which has lendable liquidity on each of these markets that compares with the is comparable to or greater than the usual daily volume of all central and decentralized exchanges."

Robert Leshner, founder of Compound, tweeted that this precautionary measure would not affect existing users. 


Following the @mangomarkets exploit, @gauntletnetwork has proposed disabling new supply for the most thinly traded collateral.


This conservative approach won't impact existing users, and encourages the migration of usage to Compound III (which is resistant to the attack vector). https://t.co/yMQDgRXru7


— Robert Leshner (@rleshner) October 21, 2022

On October 11, Avraham Eisenberg, the hacker behind the exploit at Mango Markets , manipulated the value of a pledged collateral, namely the platform's native token MNGO, to a higher rate and then took out large loans against the inflated collateral. So the assets on Mango could all be stolen.


The exploit, which describes itself as a digital art dealer on Twitter, claimed that it and a team of hackers used an "extremely profitable trading strategy". These would be "legal actions in the open market using the protocol as intended".


After a proposal was accepted in the Mango Governance Forum, Eisenberg was allowed to keep $47 million as a "bug bounty" . $67 million was returned to Mango.

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