Mitigating game theoretic vulnerabilities in Chainlink

Mitigating game theoretic vulnerabilities in Chainlink

Dekker, Hans (TU Delft Electrical Engineering, Mathematics and Computer Science; TU Delft Intelligent Systems)

Ersoy, O. (mentor)
Erkin, Z. (graduation committee)
Urbano, Julián (graduation committee)

Delft University of Technology

Computer Science and Engineering

CSE3000 Research Project

2021-07-01

Oracles are mechanisms that provide blockchain networks with data that only exists outside of the network, such as asset prices. Decentralized Finance (DeFi) protocols use this data, and therefore their usability depends on the reliability of oracles. One such oracle system, widely used by DeFi protocols for pricing feeds, is Chainlink. The Chainlink system mitigates the risk of oracle manipulation attacks that have occurred in various DeFi protocols with a decentralized data aggregation infrastructure. The participants of the Chainlink system are incentivized by a coordination game, which poses game theoretic risks. While some game theoretic analyses of blockchain based systems exist, no formal study has been done on the incentives securing the Chainlink system. In this paper, we present a formal incentive model of the participants in the Chainlink system. We show that users can not detect whether incentives are aligned such that honest node behaviour is a strictly dominant strategy, making it impossible for users to assess the security of the system. We propose a mitigation which enables users to assess the agent incentives of Chainlink nodes such that they can verify whether honest behaviour is a strictly dominant strategy for all participants.

Decentralized Finance
Oracles
Chainlink

http://resolver.tudelft.nl/uuid:b9a62989-f7b3-4334-af27-c4cde929d7df

Student theses

bachelor thesis

© 2021 Hans Dekker