How to Calculate The Attack Costs Of Different Oracle Networks: The Key Concepts

In the presentation below, Clément Lesaege, co-founder of Kleros, presented the attack costs of different oracle networks and how to calculate the potential profit from corrupting them.

Below is a glossary of key concepts mentioned during Clement’s talk, intended as a supplement to his video presentation.

About Kleros

Kleros is a decentralized protocol built on the Ethereum blockchain that leverages crowdsourcing and game theory to arbitrate disputes quickly, and economically. The protocol’s core product is the Kleros court, where disputes are settled through a majority vote by randomly selected jurors incentivized to participate using $PNK, the native token of the platform.

51% Attacks

A 51% attack or a majority attack occurs when more than half of the power to submit information is controlled by a single person or group of people. Essentially, this group has the ability to submit whatever information that is beneficial to them. Due to the decentralized nature of blockchains and Oracle protocols, 51% attacks will always be a risk. Because of this, protocols must utilize methods to make attacks economically unfeasible.

Check out this article for a deep dive into all things related to oracle manipulation.

Arbitration Protocols

Arbitration protocols are decentralized systems that operate on predefined rules and smart contracts and are designed to address on-chain disputes. When disputes arise, both parties submit their case details and evidence to a panel of randomly selected jurors who evaluate the information and vote on the verdict.

These jurors are rewarded, using the native token, when they arbitrate honestly or may have their staked tokens slashed in case of misconduct.

Examples of arbitration protocols include Kleros and Aragon Court. Here are some popular examples of on-chain arbitration.

Forking

Forking refers to the process of creating a new version of a blockchain’s protocol, resulting in the splitting of the original blockchain into two separate chains. Forks occur when there are fundamental disagreements or updates within the community about the direction or rules of the blockchain. There are two main types of forks, namely hard forks and soft forks.

Re-Staking

In a PoS network, participants lock up a certain amount of their cryptocurrency as collateral to become validators or participate in the consensus process. Re-staking involves taking the rewards earned from staking, such as transaction fees or newly minted tokens, and adding them back to the initial stake, effectively compounding the amount of staked tokens.

This allows participants to benefit from both the initial staked amount and the additional rewards generated.

MEV

Maximal Extractable Value (MEV) refers to the profits that miners or validators can potentially make by reordering and including transactions in a specific order within a block. On the blockchain, transaction ordering can affect the final outcome and pricing of transactions.

Profits from MEV are gained by miners who engage in practices such as front-running, back-running, and sandwich attacks. This involves prioritizing transactions that are likely to profit, such as executing trades just ahead of large transactions or exploiting arbitrage opportunities between different trading platforms.

A prominent example of MEV is the flash loan attack on the decentralized finance (DeFi) protocol bZx.

Learn more about Kleros here:

Kleros Website
Kleros Documentation
Kleros Twitter
Clément Lesaege Twitter

The Blockchain Oracle Summit is the world’s only technical summit that dives deep into the use cases, limitations, and impacts of oracles on the wider blockchain ecosystem. Leading speakers worldwide gathered in Paris to share their work and experience building and using Oracle solutions. Article by Michael Abiodun.