Over-Borrowing Exploit

Definition ∞ An over-borrowing exploit is a type of attack in decentralized finance where a malicious actor manipulates a lending protocol to borrow more assets than their collateral should permit. This often occurs by exploiting vulnerabilities in price oracles, re-entrancy bugs, or flash loan mechanisms to temporarily inflate collateral value. Such exploits result in significant losses for the protocol and its liquidity providers. It represents a critical security failure.
Context ∞ Over-borrowing exploits represent a persistent and high-impact threat within the DeFi ecosystem, frequently reported in crypto news. The ongoing discussion focuses on strengthening smart contract security audits, enhancing oracle decentralization, and implementing more sophisticated risk parameters in lending protocols. Future protocol designs will prioritize robust economic security models and real-time monitoring to prevent these types of attacks.