🚨 [Analysis] The stablecoin vulnerability that needs more attention – Daanish Khazi

A lot of the concern surrounding stablecoins revolves around their economics, but major stablecoin projects, including Basis, MakerDAO, and Carbon, still have unresolved issues with their oracle designs. Stablecoin projects are testing various oracle models, with varying degrees of decentralization, but there are vulnerabilities present in each model. This problem is not just limited to stablecoins, as any blockchain project that attempts to interface with the real world requires a secure, reliable oracle service, but the vulnerability is especially pronounced for stablecoins as oracles can be exploited by speculators and malicious actors for personal financial gain, and in many cases, these financial incentives can be more significant than the internal mechanisms of the oracles design. With centralized models there trustlessness is lost as one must trust the parties maintaining the data stream, and with decentralized models (which follow a Schelling point scheme), there are various vulnerabilities including P + Epsilon attacks, vote meming, and 51% attacks. Some designs leverage a semi-decentralized model in attempts to find a middle ground between trusting honest actors and trusting a protocol’s cryptoeconomic design.