Cryptology ePrint Archive: Report 2022/445

TWAP Oracle Attacks: Easier Done than Said?

Torgin Mackinga and Tejaswi Nadahalli and Roger Wattenhofer

Abstract: Blockchain ``on-chain'' oracles are critical to the functioning of many Decentralized Finance (DeFi) protocols. We analyze these oracles for manipulation resistance. Specifically, we analyze the cost of manipulating on-chain time-weighted average price (TWAP) oracles that use the arithmetic mean. It has been assumed that manipulating a TWAP oracle with the well-known multi-block attack is expensive and scales linearly with the length of the TWAP. We question this assumption with two novel results. First, we describe a single-block attack that works under the same setting as the multi-block attack but costs less to execute. Second, we describe a multi-block MEV (MMEV) style attack where the attacker colludes with a miner/proposer who can mine/propose two blocks in a row. This MMEV style attack makes oracle manipulation orders of magnitude cheaper than previously known attacks. In the proof-of-work setting, MMEV can be done by selfish mining even with very low shares of hashpower.

Category / Keywords: cryptographic protocols / TWAP Oracles, MEV, DeFi

Original Publication (in the same form): ICBC 2022

Date: received 8 Apr 2022

Contact author: tejaswin at ethz ch

Available format(s): PDF | BibTeX Citation

Version: 20220412:074315 (All versions of this report)

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