DeFi and IoT Systems Highlight Oracle Security Risks

The significance of safeguarding against oracle attacks is demonstrated by recent real-world examples. In 2021, a major DeFi platform suffered a multi-million dollar loss through a manipulation of a single, unverified price feed. The attacker employed a flash loan to artificially boost an asset's value, causing liquidations that resulted in gains for the attacker. This incident brought attention to the vulnerabilities of centralized oracles and encouraged the shift towards decentralized oracle solutions. Additionally, IoT systems that depend on oracles for immediate data, such as tracking supply chains, are vulnerable if their oracles are compromised. A falsified oracle could deliver incorrect shipment information, potentially causing operational failures or financial damage. These scenarios underline the critical need for secure and resilient oracle systems across different sectors.