Definition ∞ A token inflation attack is a malicious act designed to artificially increase the supply of a digital token beyond its intended limits. This attack typically exploits vulnerabilities in a smart contract’s minting function, access control mechanisms, or economic parameters, allowing an unauthorized party to create new tokens. The sudden influx of new tokens dilutes the value of existing holdings, causing significant financial detriment to legitimate token holders. Such an attack fundamentally undermines the scarcity and economic model of the affected digital asset.
Context ∞ Token inflation attacks are among the most damaging exploits in the digital asset sector, frequently reported in news when a protocol’s economic stability is compromised. The situation underscores the paramount importance of secure smart contract development, comprehensive security audits, and robust governance models to prevent unauthorized token generation. A critical future development involves the widespread adoption of formal verification techniques to mathematically prove the absence of such minting vulnerabilities.
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