10 Common DeFi Attack Vectors & How To Prevent Them

1. Oracle Manipulation

Oracles provide asset price data in DeFi. If manipulated, they can display incorrect prices, allowing attackers to exploit arbitrage opportunities, harming the protocol.

Solution: Use protocols that integrate reputable oracles like Chainlink to minimize risks.

2. Flash Loan Attacks

Flash loans allow borrowing without collateral within a single transaction. Attackers can borrow large amounts, manipulate prices or protocol mechanisms, and repay the loan in the same transaction for profit.

Solution: Choose protocols with protections against flash loans and reliable oracle integrations.

3. Governance Attacks (51% Attack)

Attackers use flash loans to gain majority voting power, passing proposals that benefit them, such as transferring assets from the protocol.

Solution: Protocols should implement strict governance mechanisms, including proposal delays and voting caps.

4. Front-Running

Attackers monitor pending transactions, placing their own orders beforehand to profit from price movements caused by the original transaction.

Solution: Utilize tools like Flashbots to hide transactions from the public mempool.

5. Admin Key Exploits

If admin keys are compromised or misused, attackers can alter smart contracts, withdraw assets, or change protocol logic.

Solution: Protocols should employ multi-signature setups and limit admin key privileges.

6. Phishing Front-Ends

Attackers create fake interfaces resembling legitimate DeFi protocols to trick users into entering private keys or executing transactions.

Solution: Always verify URLs, use bookmarks, and confirm websites before interacting.

7. Social Media Attacks

Malicious actors impersonate official accounts on social media, sharing malicious links or false information to deceive users.

Solution: Verify information from multiple sources and be cautious with unfamiliar links.

8. Social Media Account Takeovers

Compromised official accounts can be used to spread false information, scamming users.

Solution: Protocols should secure accounts with two-factor authentication, and users should be wary of unusual communications.

9. Layer 1 Exploits

Exploiting vulnerabilities in the underlying blockchain (Layer 1) can impact the entire DeFi ecosystem built upon it.

Solution: Choose blockchains with strong security measures and regular audits.

10. Third-Party Attacks

Third-party services like wallets and browsers can be targeted, affecting DeFi users.

Solution: Use software from trusted sources and keep them updated regularly.