Definition ∞ A liquidity exploit is a vulnerability within a decentralized finance protocol, particularly automated market makers, that allows attackers to manipulate asset prices or drain liquidity pools. These exploits often arise from complex interactions between protocol logic and market conditions, enabling unauthorized extraction of value. Recognizing such exploits is vital for assessing DeFi protocol risk.
Context ∞ The DeFi sector frequently encounters novel attack vectors targeting its liquidity mechanisms. Sophisticated exploits can manipulate price oracles or leverage flash loans to create artificial market conditions, leading to substantial financial losses. Security researchers and protocol developers are in a continuous race to identify and patch these vulnerabilities before they can be exploited.
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