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DOI: 10.4230/LIPIcs.AFT.2023.15

Condorcet Attack Against Fair Transaction Ordering

Authors: Mohammad Amin Vafadar and Majid Khabbazian

Published in: LIPIcs, Volume 282, 5th Conference on Advances in Financial Technologies (AFT 2023)

Abstract

We introduce the Condorcet attack, a new threat to fair transaction ordering. Specifically, the attack undermines batch-order-fairness, the strongest notion of transaction fair ordering proposed to date. The batch-order-fairness guarantees that a transaction tx is ordered before tx' if a majority of nodes in the system receive tx before tx'; the only exception (due to an impossibility result) is when tx and tx' fall into a so-called "Condorcet cycle". When this happens, tx and tx' along with other transactions within the cycle are placed in a batch, and any unfairness inside a batch is ignored. In the Condorcet attack, an adversary attempts to undermine the system’s fairness by imposing Condorcet cycles to the system. In this work, we show that the adversary can indeed impose a Condorcet cycle by submitting as few as two otherwise legitimate transactions to the system. Remarkably, the adversary (e.g., a malicious client) can achieve this even when all the nodes in the system behave honestly. A notable feature of the attack is that it is capable of "trapping" transactions that do not naturally fall inside a cycle, i.e. those that are transmitted at significantly different times (with respect to the network latency). To mitigate the attack, we propose three methods based on three different complementary approaches. We show the effectiveness of the proposed mitigation methods through simulations, and explain their limitations.

Cite as

Mohammad Amin Vafadar and Majid Khabbazian. Condorcet Attack Against Fair Transaction Ordering. In 5th Conference on Advances in Financial Technologies (AFT 2023). Leibniz International Proceedings in Informatics (LIPIcs), Volume 282, pp. 15:1-15:21, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2023)

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@InProceedings{vafadar_et_al:LIPIcs.AFT.2023.15,
  author =	{Vafadar, Mohammad Amin and Khabbazian, Majid},
  title =	{{Condorcet Attack Against Fair Transaction Ordering}},
  booktitle =	{5th Conference on Advances in Financial Technologies (AFT 2023)},
  pages =	{15:1--15:21},
  series =	{Leibniz International Proceedings in Informatics (LIPIcs)},
  ISBN =	{978-3-95977-303-4},
  ISSN =	{1868-8969},
  year =	{2023},
  volume =	{282},
  editor =	{Bonneau, Joseph and Weinberg, S. Matthew},
  publisher =	{Schloss Dagstuhl -- Leibniz-Zentrum f{\"u}r Informatik},
  address =	{Dagstuhl, Germany},
  URL =		{https://drops.dagstuhl.de/entities/document/10.4230/LIPIcs.AFT.2023.15},
  URN =		{urn:nbn:de:0030-drops-192045},
  doi =		{10.4230/LIPIcs.AFT.2023.15},
  annote =	{Keywords: Transaction ordering, fairness, Condorcet cycle}
}

Document

DOI: 10.4230/LIPIcs.AFT.2023.27

Liquidity Management Attacks on Lending Markets

Authors: Alireza Arjmand and Majid Khabbazian

Published in: LIPIcs, Volume 282, 5th Conference on Advances in Financial Technologies (AFT 2023)

Abstract

Decentralized Finance (DeFi) continues to open up promising opportunities for a broad spectrum of users, with lending pools emerging as a cornerstone of its applications. While prominent platforms like Compound and Aave maintain a large share of the funds in lending pools, numerous other smaller pools also exist. Many of these smaller entities draw heavily from the design principles of their larger counterparts due to the complex nature of lending pool design. This paper asserts that the design approaches that serve larger pools effectively may not necessarily be the most beneficial for smaller lending pools. We identify and elaborate on two liquidity management attacks, which can allow well-funded attackers to exploit specific circumstances within lending pools for personal gain. Although large lending pools, due to their vast and diverse liquidity and high user engagement, are generally less vulnerable to these attacks, smaller lending protocols may need to employ specialized defensive strategies, particularly during periods of low liquidity. We also show that beyond the six leading lending protocols, there exists a market value exceeding $1.75 billion. This considerable sum is dispersed among over 200 liquidity pools, posing a potentially attractive target for bad actors. Furthermore, we evaluate existing designs of lending pools and suggest a novel architecture that distinctly separates the liquidity and logic layers. This unique setup gives smaller pools the adaptability they need to link with larger, well-established pools. Despite encountering certain constraints, these emerging pools can leverage the considerable liquidity from larger pools until they generate sufficient funds to form their own standalone liquidity pools. This design cultivates a setting where multiple lending pools can integrate their liquidity components, thus encouraging a more diverse and robust liquidity environment.

Cite as

Alireza Arjmand and Majid Khabbazian. Liquidity Management Attacks on Lending Markets. In 5th Conference on Advances in Financial Technologies (AFT 2023). Leibniz International Proceedings in Informatics (LIPIcs), Volume 282, pp. 27:1-27:21, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2023)

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@InProceedings{arjmand_et_al:LIPIcs.AFT.2023.27,
  author =	{Arjmand, Alireza and Khabbazian, Majid},
  title =	{{Liquidity Management Attacks on Lending Markets}},
  booktitle =	{5th Conference on Advances in Financial Technologies (AFT 2023)},
  pages =	{27:1--27:21},
  series =	{Leibniz International Proceedings in Informatics (LIPIcs)},
  ISBN =	{978-3-95977-303-4},
  ISSN =	{1868-8969},
  year =	{2023},
  volume =	{282},
  editor =	{Bonneau, Joseph and Weinberg, S. Matthew},
  publisher =	{Schloss Dagstuhl -- Leibniz-Zentrum f{\"u}r Informatik},
  address =	{Dagstuhl, Germany},
  URL =		{https://drops.dagstuhl.de/entities/document/10.4230/LIPIcs.AFT.2023.27},
  URN =		{urn:nbn:de:0030-drops-192164},
  doi =		{10.4230/LIPIcs.AFT.2023.27},
  annote =	{Keywords: Lending Pools, DeFi, Interest Rate, Liquidity Management Attack}
}

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Documents authored by Khabbazian, Majid

Condorcet Attack Against Fair Transaction Ordering

Abstract

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Liquidity Management Attacks on Lending Markets

Abstract

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