What is the Context of Liquidation Attack?

Reports of liquidation attacks occasionally appear in crypto news, highlighting the security risks present in certain decentralized finance protocols. These incidents underscore the importance of robust oracle security, reliable price data, and resilient network infrastructure for DeFi platforms. Protocol developers continually work to strengthen defenses against such manipulations through improved oracle designs and more sophisticated risk parameters. The potential for liquidation attacks remains a critical concern for the stability and trustworthiness of decentralized lending and borrowing markets.

Liquidation Attack

Definition

A liquidation attack is a malicious attempt to force the premature closure of collateralized positions in decentralized finance. This type of attack typically involves manipulating oracle price feeds or network congestion to trigger liquidations at artificially low collateral values. Attackers aim to profit by acquiring the liquidated collateral at a reduced price or by disrupting protocol stability. Such attacks exploit vulnerabilities in decentralized lending protocols or stablecoin systems, potentially causing significant financial losses for users.

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∞Synthetic Asset

∞Decentralized Finance

∞Protocol Vulnerability

Numa Protocol Suffers Synthetic Asset Manipulation Exploit

A vault logic flaw enabled attackers to inflate synthetic asset value, leading to collateral manipulation and unauthorized liquidations.

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∞Ethereum Bridge

∞Arbitrum

∞Smart Contract

Abracadabra Finance Suffers $13 Million Flash Loan Liquidation Exploit

A critical smart contract vulnerability in Abracadabra's lending cauldrons allowed flash loan manipulation, enabling unauthorized liquidation profit extraction.