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Timelocks are often applied in the context of governance updates, so that users have time to react to proposed changes. Timelock: A smart contract mechanism that requires a non-zero amount of time to pass before an action can be completed, for instance, if an action can only be completed in a subsequent block. A typical example aims to manipulate the instantaneous price at which a targeted swap is executed.
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It can take the form of a single transaction attack, in which a smart contract system is usually being exploited, or a multiple transaction attack, in which new transactions are inserted before and after a user-generated transaction or swap. It usually involves inserting, or “sandwiching”, contract calls before and after a targeted contract call, usually an asset swap. Sandwich attacks/transaction ordering attacks: A type of exploit in which an attacker orders contract calls in a way to set up a profit opportunity through manipulating the technical implementation and state of a system. GEV includes short-termism and explicit governance attacks. GEV is the value that governors can extract from the system through this role, including potentially perverse incentives to deviate from the best interest of the protocol, for instance, by effecting changes that provide outside benefit to governors but may be harmful to overall system health.
#Defi overview update#
Governance extractable value ( GEV): Many DeFi protocols have governors who perform a governance function to update the protocol over time. MEV is the value that miners can extract by selectively ordering, censoring, or inserting transactions within a block or across blocks. A rational miner will order transactions in ways that earn them revenues and even insert their own transactions to extract further revenues. Miner extractable value ( MEV): Blockchain miners have the ability to control the sequence in which transactions are executed. Composability means that smart contracts can be snapped together like Lego bricks, with the possibility of building complex interconnected financial architectures. BackgroundĪtomicity: A transaction property dictating that the transaction either succeeds fully, resulting in a state update, or fails entirely, leaving state unaltered, such that no execution can result in an invalid state.Ĭomposability: A property of smart contracts that are able to communicate with one-another, via message-calls, within the same execution context. Werner, S.M., Perez, D., Gudgeon, L., Klages-Mundt, A., Harz, D., Knottenbelt, W.J.: Sok: Decentralized Finance (DeFi). The paper exhaustively delineates the DeFi security challenge into technical security and economic security, centering on the property of atomicity, and connects these categories back to the fundamental research work that is needed to make DeFi secure. Resolving economic security requires synthesizing insights and models from across computer science, economics, and finance.
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It is sparsely studied yet growing in importance.
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It is best addressed with program analysis and formal specification of protocols. These typically abuse the technical implementations of protocols and transaction ordering/inclusion within blocks.