Lending Protocol Moonwell Exploited via Faulty Oracle Price Feed Manipulation ∞ Security

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Briefing

The Moonwell decentralized lending protocol on the Base and Optimism networks was compromised by a sophisticated oracle manipulation attack on November 4, 2025. This systemic failure allowed a threat actor to exploit a faulty off-chain price feed, enabling the borrowing of substantial assets against artificially inflated collateral. The attack vector, executed via a flash loan and repeated transactions, resulted in a confirmed loss of approximately $1 million in Ether and liquid staking derivatives.

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Context

The prevailing architectural risk in DeFi lending remains the reliance on external data feeds for collateral valuation, particularly for newly deployed or complex assets like liquid staking derivatives. Despite multiple security audits, protocols often fail to implement robust, multi-source oracle validation mechanisms or sufficient heartbeat updates, leaving a critical attack surface open to price manipulation and flash loan-enabled arbitrage. This class of exploit is a known, persistent weakness in the lending sector.

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Analysis

The attack vector targeted a malfunctioning off-chain oracle providing the rsETH/ETH price feed, which incorrectly reported the price of wrapped restaked ETH ( wrstETH ) at a massive overvaluation of approximately $5.8 million per token. The attacker initiated a flash loan to deposit a minimal amount of wrstETH (e.g. 0.02 wrstETH ), which the protocol’s lending contract, relying on the faulty oracle, incorrectly valued as sufficient collateral.

This allowed the actor to repeatedly borrow a disproportionate amount of assets, specifically wstETH , against the artificially inflated collateral value, effectively draining the liquidity pools on both Base and Optimism deployments. The transactions were likely executed by a Maximum Extractable Value (MEV) bot, exploiting the price discrepancy immediately.

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Parameters

Total Loss ∞ $1 Million ∞ The approximate value of 295 ETH and other assets drained from the protocol.
Vulnerability Type ∞ Oracle Manipulation ∞ Exploit of a faulty rsETH/ETH price feed for collateral valuation.
Exploited Asset ∞ Wrapped Restaked ETH ( wrstETH ) ∞ The token whose price was artificially inflated by the faulty oracle to enable the over-collateralized loan.
Chains Affected ∞ Base and Optimism ∞ The Layer 2 networks where the vulnerable lending contracts were deployed.

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Outlook

Immediate mitigation requires all lending protocols to review and harden their oracle integration logic, prioritizing decentralized, time-weighted average price (TWAP) mechanisms over single-source feeds, especially for volatile or low-liquidity assets. This incident will accelerate the adoption of real-time risk monitoring systems to detect and pause anomalous collateral-to-debt ratios instantly, preventing the compounding effect of repeated flash loan transactions. The second-order effect is a renewed focus on the security of liquid staking derivatives as collateral, given their complex price derivation logic and the critical need for a robust oracle layer.

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Verdict

This oracle manipulation attack confirms that external data dependency remains the single most critical and under-mitigated systemic risk in the entire decentralized lending landscape.

Oracle manipulation, flash loan attack, price feed exploit, lending protocol security, smart contract vulnerability, decentralized finance risk, collateral valuation error, layer two network, Base network exploit, Optimism network, on-chain arbitrage, restaking token, liquid staking derivative Signal Acquired from ∞ coingabbar.com