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Offline Chronos

Price feed manipulation attack
« on: February 12, 2015, 05:37:59 PM »

Is there a possibility of an attack wherein 51% of delegates decide to misreport a price feed much much too low, triggering a black swan for their own benefit? For example, by buying BitUSD before the attack, and liquidating during the event, for an outsized amount of BTS? What kind of profit could be made by delegates acting in this way (3x their investment, perhaps)?

If a majority can collude in a highly profitable way, it is naive to expect that they never will, simply because such an action would require a majority.

Offline Ander

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Re: Price feed manipulation attack
« Reply #1 on: February 12, 2015, 06:00:01 PM »
I think this is possible, thought BTS has the nuclear defense against it.

Step 1: Either install 51 corrupt delegates yourself somehow, or convince 51 delegates to collude.  I think that trying to coordinate that many delegates would be hard and your plan would get revealed, but lets say you achieve it.
Note that if you are installing your own delegates, the fact that a ton of delegates have been replaced by new delegates is a big hint that something is happening, and should make people much more careful.  If you do it over time, you have the problem of trying to maintain all these delegate identities.

Step 2: Rig the price feed of all your delegates, causing the blockchain to believe the price has crashed.  Cover your bitasset shorts to make a profit. 


The nuclear defense is that if you actually destroyed the system, the community will hard fork back to the old state, and eliminate the delegates (and possibly eliminate the stake which voted in all the delegates as well, if it was a case of one person voting them all in).  There would then be two versions of BTS competing for network effect, and the community would need to align onto one of the forks.    Of course, this would only happen if you did catastrophic damage. 

I feel this is similar to 51% attacks in other coins.  It is important that the community be watchful of delegates, they are the trusted party in Bitshares, we must be vigilant to make sure that delegates are very trustworthy.
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Offline Chronos

Re: Price feed manipulation attack
« Reply #2 on: February 12, 2015, 06:10:44 PM »
Of course, this would only happen if you did catastrophic damage.
Black swan event that liquidates all BitUSD in system would probably qualify as such. Thanks for your informative post!

Offline bytemaster

Re: Price feed manipulation attack
« Reply #3 on: February 12, 2015, 07:15:58 PM »
You would also have to buy all of the order book.  Feed alone is not sufficient to margincall
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Offline Ander

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Re: Price feed manipulation attack
« Reply #4 on: February 12, 2015, 07:22:54 PM »
You would also have to buy all of the order book.  Feed alone is not sufficient to margincall

That seems important.

So you would have to buy the whole orderbook, which is near the true price, not the newly manipulated price, correct? 
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Offline bytemaster

Re: Price feed manipulation attack
« Reply #5 on: February 12, 2015, 07:51:47 PM »
You would also have to buy all of the order book.  Feed alone is not sufficient to margincall

That seems important.

So you would have to buy the whole orderbook, which is near the true price, not the newly manipulated price, correct?

Correct.
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Offline Agent86

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Re: Price feed manipulation attack
« Reply #6 on: February 12, 2015, 08:07:08 PM »
In the old system (assuming it is correctly implemented) this type of manipulation is not a big concern because changing the feed shouldn't force anyone to transact at that price and and people will place their orders based on the expectation that the feed will correct.

In the new/other system proposed by BM today it's a disaster-  drop the feed price to close to zero and short yourself a few million BitUSD while posting very little collateral.  You don't get margin called because you are protected by the feed - which you control.  So you could sell those "free" bitUSD to any open buy orders.

Offline Ander

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Re: Price feed manipulation attack
« Reply #7 on: February 12, 2015, 08:09:39 PM »
In the old system (assuming it is correctly implemented) this type of manipulation is not a big concern because changing the feed shouldn't force anyone to transact at that price and and people will place their orders based on the expectation that the feed will correct.

In the new/other system proposed by BM today it's a disaster-  drop the feed price to close to zero and short yourself a few million BitUSD while posting very little collateral.  You don't get margin called because you are protected by the feed - which you control.  So you could sell those "free" bitUSD to any open buy orders.

That idea has been scrapped anyway.

Yes, its important that whatever system we use not be highly vulnerable to feed manipulation.
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