From Creation to Exploitation: The Oracle Lifecycle

Decentralized Finance (DeFi) systems leverage blockchain oracles to access off/on-chain data as a service. Therefore, maintaining the integrity of oracle data is essential. However, the integrity of these oracles data can be compromised through different attacks, and the effectiveness of these attacks varies depending on the specific stage of the oracle's lifecycle. This work presents a comprehensive analysis of this lifecycle, identifying potential attack types and examining the efficacy of existing defense mechanisms. We propose a generalized model encompassing data creation, submission, consensus, election, and deprecation stages. We evaluate our model against seven recent high-profile DeFi exploits totaling $187 million. We have also studied bond systems as a preventive measure against at least a subset of oracle exploits. Our findings suggest that while bond systems increase the cost of attacks, thereby fortifying oracle data integrity against adversarial manipulations, they also require careful calibration to avoid hindering honest participation.