The Flawed Pricing Calculation of Deflationary Tokens: The Reason Behind the Polygon Ecosystem Hack

According to reports, security agency BlockSec tweeted that the fundamental reason for the hacker attack on the Polygon ecosystem project 0VIX Protocol is the flawed pricing calculation of deflationary tokens. Specifically, vGHST is the equity token of GHST, and the lending platform provides a market for vGHST (ovGHST). The ovGHST price oracle machine depends on the conversion rate from vGHST to GHST. The attacker first borrows a large amount of vGHST in contract 0x49c6 to increase the corresponding borrowing amount. Afterwards, he transferred a large amount of money to the vGHST contract. This will affect the conversion rate from vGHST to GHST. Therefore, the contract 0x49c6 becomes insolvency, and the attacker gains by clearing the contract.

Security Agency: The root cause of 0VIX being attacked is a flaw in the price calculation of deflationary tokens

The recent hacker attack on the Polygon ecosystem project 0VIX Protocol has been making headlines, and the security agency BlockSec has tweeted that the fundamental reason for the attack is the flawed pricing calculation of deflationary tokens. Specifically, vGHST is the equity token of GHST, and the lending platform provides a market for vGHST (ovGHST). The ovGHST price oracle machine depends on the conversion rate from vGHST to GHST. In this article, we will delve deeper into the mechanics of this pricing calculation, and why it led to the hack of 0VIX Protocol.

Outline

I. Introduction
– Background of the Polygon ecosystem project 0VIX Protocol
– Overview of the hacker attack and its impact
– BlockSec’s tweet about the cause of the attack
II. What are deflationary tokens?
– Definition and working mechanism of deflationary tokens
– Examples of popular deflationary tokens
– Advantages and disadvantages of deflationary tokens
III. vGHST and ovGHST tokens
– Introduction to vGHST and ovGHST tokens
– Overview of GHST lending platform
– Pricing calculation of ovGHST
– How vGHST affects the conversion rate to GHST
IV. The Hacker Attack on 0VIX Protocol
– Explanation of the contract 0x49c6
– How the attacker borrowed a large amount of vGHST
– The impact of transferring a large amount of money to the vGHST contract
– How this made contract 0x49c6 insolvent and benefited the attacker
V. Flaws in the pricing calculation of deflationary tokens
– The vulnerability of pricing calculations in deflationary tokens
– Risk factors associated with these calculations
– Measures that can be taken to avoid such incidents in the future
VI. Conclusion
– Summary of key points
– Possible solutions and security measures for such issues
– Final thoughts and recommendations

The Flawed Pricing Calculation of Deflationary Tokens: The Reason Behind the Polygon Ecosystem Hack

The Polygon ecosystem project 0VIX Protocol is a popular protocol for decentralized finance (DeFi) applications. It had recently suffered a hacker attack, which resulted in the depletion of funds and temporary dysfunction of some of the platform’s features. This incident also caused panic among the investors, as many feared losing their investments.
According to BlockSec, the hacking incident was caused by the flawed pricing calculation of deflationary tokens. Deflationary tokens are cryptocurrencies or tokens that are designed to decrease in supply over time. This means that as demand grows, the number of tokens decreases, making them more valuable. The key feature of deflationary tokens is that they have a supply cap, which means that the issuance of new tokens is limited.
Popular examples of deflationary tokens include Binance Coin (BNB), Ripple (XRP), and the notorious Dogecoin (DOGE). Deflationary tokens have gained popularity in recent years due to their perceived value proposition, including long-term price stability, and the potential for increased demand and value over time.
vGHST is the equity token of GHST, and the lending platform provides a market for vGHST (ovGHST). The ovGHST price oracle machine depends on the conversion rate from vGHST to GHST. The attacker first borrows a large amount of vGHST in contract 0x49c6 to increase the corresponding borrowing amount. Afterwards, the attacker transferred a large amount of money to the vGHST contract. This leads to a change in the conversion rate from vGHST to GHST and results in contract 0x49c6 becoming insolvent. This hack highlights how a flawed pricing calculation can have catastrophic consequences for a DeFi protocol.
The fact that deflationary tokens have supply caps and can’t be minted endlessly means that their pricing calculations are complex and require sophisticated algorithms and mechanisms. This complexity makes them more challenging to price accurately and adds to the risk factors associated with DeFi protocols, hence making them particularly vulnerable to attacks.
Furthermore, the DeFi ecosystem is known for its high levels of perplexity and burstiness, meaning that it has a high rate of sudden spikes in activity. Such bursts can be challenging to manage and can lead to price fluctuations and chaos if not managed correctly.
To minimize the risk associated with pricing calculations of deflationary tokens, protocols need to build in robust security measures that are up to date with the latest trends in the DeFi space. These measures should include regular testing and audits, including white-hat hacking, to identify vulnerabilities and areas of weakness.
In conclusion, it is essential to ensure that the security issues are addressed and resolved in the DeFi protocols, especially with the rise in popularity of cryptocurrencies and DeFi platforms as investment options. Until such an approach is vigorously adopted, their long-term safety is vulnerable, and there is a probability of unauthorized access to these platforms.

FAQs

Q1. What makes deflationary tokens unique?
Ans: Deflationary tokens have a supply cap, which means that the issuance of new tokens is limited. This makes them more valuable over time as demand grows.
Q2. How does vGHST affect the conversion rate to GHST?
Ans: The ovGHST price oracle machine depends on the conversion rate from vGHST to GHST. Any changes in the conversion rate can have a significant impact on the lending platform.
Q3. What measures can be taken to minimize the risks associated with pricing calculations of deflationary tokens?
Ans: To minimize the risk associated with pricing calculations of deflationary tokens, protocols need to build robust security measures that include regular audits and testing to identify vulnerabilities and areas of weakness.