Compound Finance experiences oracle attack, over $100 million liquidated, increasing calls to integrate ChainLink

DeFi Protocol, Compound Finance faced oracle attack by hackers due to Coinbase Pro's dramatic fluctuations in pricing.

By · Nov 27, 2020 . 5min read

Compound Finance $100 million oracle attack news

Popular DeFi protocol Compound Finance appeared to have been fleeced by hackers for over $100 million using an oracle attack approach.

Sources point to the fact that the attack originated through Coinbase Pro where Dai stablecoin token exhibited dramatic fluctuation in pricing. Unfortunately, Compound protocol draws its price feed from Coinbase Pro – a centralized price reference point.

As Marlboroxu an official of Oklink exchange posted on Twitter, his screenshot showed a liquidation of at least $88 million.

Meanwhile, Hongbo, the founder of DeBank, explained how this attack must have been staged. According to a recent Blockbeats publication where Hongbo commented,

manipulating the information source that the oracle relies on for short-term price manipulation to achieve misleading prices on the chain is a typical oracle attack

Dai-dollar-peg data provided by the Coinbase oracle pushed the price of the stablecoin to about $1.30. This is already an abnormality for any stablecoin leaving some users on Compound under-collateralized. And due to the built-in protocol rules for the lending app, this triggered forced liquidation on borrowers collateralized debt position (CDP).

The next logical question most people keep asking is: “Why hasn’t Compound integrated ChainLink?” Compound, it has seen both the good and bad days since Robert Leshner invented it in 2018. With ChainLink’s market dominance and overwhelming projects in the cryptocurrency space integrating its decentralized price feed, Compound didn’t consider it necessary.

DeFi projects which rely highly on on-chain data reference had to face serious issues. Not, until many started using ChainLink price oracle did they restore confidence. In fact, due to ChainLink’s dominance, many have christened it the “God Link”. This is so because it’s the preferred oracle solutions provider for decentralized projects and even legacy solutions.

This oracle attack event marks the platform’s largest liquidation. In July this year, Compound withstood $6.3 million worth of liquidations in 24 hours. Moreover, there’s yet to be an official statement from Coinbase Pro as to how the attack happened through its platform.

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