A group of miners controlling 70% of the decentralized network PegNet hash rate manipulated the price of a Japanese Yen-pegged stablecoin dubbed pJPY. By submitting false data, they managed to artificially inflate a wallet balance of $11 up to $6.7 million but couldn’t liquidate the assets later.
Miners Manipulate A Stablecoin’s Price
Built on top of the Factom protocol, PegNet is a decentralized network allowing users to trade stablecoins pegged to fiat currencies, commodities, and other cryptocurrencies like Bitcoin. According to a blog post by a core developer called “WhoSoup,” however, four mining entities recently completed a form of 51% attack on the network.
More specifically, they manipulated the price of a stablecoin backed by the Japanese Yen called pJPY.
Miners collect price data from numerous oracles and APIs before submitting it to the network. In this scenario, however, the rogue miners provided 35 of the top 50 price submissions. Thus, they disposed of the remaining 15 and ultimately submitted their own arbitrary values.
The miners began the 20-minute operation with a wallet balance of $11 worth of pJPY tokens. They manipulated the exchange rate by providing the false data and later converted it to pUSD (a token backed by the US dollar). Ultimately, the overall wallet balance surged from $11 worth of JPY to above $6.7 million in pUSD, per the blog post.
But when the miners attempted liquidating the funds on spot exchanges and distribute them into numerous different wallet addresses, they failed, the post explained.
People’s Funds Are Safe
Factom Inc chairman and a leading figure behind PegNet, David Johnston, confirmed that the miners could not dump the assets, and instead, they decided to burn them. He noted that this is “another milestone in the history of PegNet, being able to repel its first 51% attack.”
He also reassured that users’ funds are safe because “PegNet has no reserve or collateral held in a pool, there were NO common user funds to drain.”
However, Johnston believes that as DeFi grows, more dangerous attacks will follow in time:
“I fully expect more sophisticated attacks over time. As values in DeFi networks rise, there is more reason to attack them. The key is building systems like PegNet, where individual users are NOT affected by the actions of others in the same network.”