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Design Flaw Attack Meaning

Oct 13, 2023 | Updated Oct 13, 2023
A design flaw attack is a cyberattack where hackers use corrupted software to access a user’s cryptocurrency asset.

A design flaw attack is a method employed by hackers to compromise a user’s assets by exploiting software vulnerabilities. The attacker deliberately introduces these vulnerabilities into a decentralized exchange or marketplace. Unsuspecting users then engage with this software, resulting in the loss of some or all of the digital assets stored in their wallet.

Design flaws are engineered to persuade users to execute transactions through a smart contract. The malicious tactics deployed by bad actors usually involve offering users incentives, prompting them to deposit their assets into the smart contract. Users interact with the software without realizing the underlying malicious elements, which can ultimately lead to the loss of their assets.

It’s worth noting that not all design flaws in software are created with malicious intent. Sometimes, developers deploy new smart contracts without being aware of inherent code flaws. When a malicious party discovers such a flaw, they exploit it to their advantage.

Example of Design Flaw Attack

One of the most well-known instances of a design flaw attack occurred on Augur. It is a decentralized prediction protocol operating on the Ethereum network. In many prediction markets on Augur, they heavily rely on oracles to provide external information on which bets are placed. Consequently, these markets deceived users into betting on contracts with ambiguous parameters, which ultimately led to disputes and losses.

In other cases, design flaw attacks specifically target the oracles and price feeds of protocols within the DeFi space. In this particular scenario, an attacker with malicious intent deliberately deploys a design flaw bug within a marketplace that depends on a single API as its price data source. Subsequently, the API is disabled before expiration. This allows the attacker to manipulate assets, smart contracts, or protocols that depend on the API for their own advantage.

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