Hi everyone. Thanks for your interest in our work.
I am Ye Wang, from ETH Zurich and today I would like to present our work, impact and use a perception of sandwich attacks in the dip ecosystem, which might be the one of the first HCI paper
exploring the security challenges in decentralized finance.
Traditional finance is all about centralized systems, such as banks and stock exchanges.
The financial security highly depends on people's trust in these financial institutions.
However, interpersonal trust is not always reliable.
There are already many problems have been exposure in centralized finance, such as bankruptcy.
So this leads more and more people to look for an alternative option, and the option is DeFi, decentralized finance.
DeFi is an ecosystem build on smart contract blockchain. Any blockchain users can create smart contracts as financial applications executing in the blockchain system, and users can perform market operations by running these financial applications.
The innovation of decentralized finance is to move our trust in centralized authorities to block chain technologies.
More precisely, the asset security in DeFi does not rely on people, but relies on the execution of the public blockchain protocol.
So that sounds perfect, right? However, nothing is perfect, because DeFi market is fully built on the blockchain.
Some blockchain features introduce security issues to the ecosystem.
First, the execution of market operations in DEFA is not immediate.
A market operation is executed only when it is included in a block by miners.
For instance, in Ethereum, it takes 15 seconds for generating a block, so there is nothing happened in the market during the interval.
Second, the execution order of market operation is not determined by when user submitted the order, or when miners receive the order.
In most scenarios, miners order transactions according to the tips paid by the users.
The third feature is information transparency. Because block transactions are transmitted through a public P2P network from users to miners, all market operations are observable for all system participants before their executions.
Because of these three features, front-running attacks have been widely applied in the ecosystem by malicious attackers. They can easily find victim transactions in P2P network and submit a transaction with a higher tip before the next block is generated, then the transaction can front-run the victim transaction.
So here I show an example of a front-running attack that I invested in the project.
The user would like to exchange francs with us dollar. If his transaction is executed successfully without any attacks, we assume that he can get a $100 back according to the market mechanism and market state.
However, an attacker may observe such a victim transaction and submit a front-running transaction with a higher tip. His front-run transaction will be executed before the victim transaction and changes the market state, then the victim trader cannot get as much dollar as he wants.
He can only get $80 back and loses $20 because of this attack.
So afterwards, the attacker conduct a back-running arbitrary transaction to take the revenue. Because of this combination of the front-running and back-running, this kind of attacks is also called sandwich attacks.
Although sandwich attacks have received attentions in DeFi community, the magnitude of their impact on users is unclear.
Therefore, we conduct a quantitative study on the largest DeFi market, Uniswap, from May 2020 to April 2021.
We quantify the impact of sandwich attacks over one year, and find that the financial losses exist 90,000 ETH, which is equivalent to 3 million dollars.
And this increasingly trend of sandwich attacks also indicates a potential gap between use perception and the real world impact. Because it seems that few of users have protected themselves from being attacked.
Therefore we design a user study to explore how users perceive the existence of sandwich attacks.
We conduct an interview study with participants from the DeFi community.
In total, we recruited 15 DeFi users, and all of them have knowledge of sandwich attack
before our interview. Our interview questions cover three different aspects: users' perception, users' attitude, and users' need for mitigation tools.
After the interview, we themetically analyze our data.
Our first findings are users' knowledge of sandwich attacks. We summarize the user knowledge of sandwich attacks from three perspectives.
First, many users have not been aware of sandwich attacks on themselves, although there are already a blockchain explorer for users to check details of transactions on the blockchain.
These tools only list all transactions on their website, which are not user friendly. As I show earlier, sandwhich attacks involve a front-running transaction and a back-running transaction of other users.
Therefore it is challenging for users to determine
whether their transaction have been influenced by others.
Second, users may not care about sandwich attacks.
if they do not perceive that they are losing money in their daily investments.
Third, we find users can hardly
notice the impact of sandwich attacks on the entire ecosystem.
For the second findings, we explore users attitude to sandwhich attack from two perspectives: individual users and DeFi communities. From individual perspectives,
we have three main takeaways.
First, we find that users have very opposing views.
Some of them thought sandwich attacks are malicious and harmful to average users, and others consider it is a common arbitrary behavior and would like to perform by themselves.
Second, our users consider that some features of decentralized exchanges make sandwich attack even serious, which is not idea of average users.
Last, some users think sandwich attacks help them to notice security issues in DeFi market.
So in some senses, are good. Because now they care more about their market operations in DeFi. From community perspectives, we summarize two main takeaways, which is quite natural and positive.
First, our interviewees consider that many users may not be aware of sandwich attacks, so the huge accumulated financial loss would not prevent them to continue using DeFi.
On the other hand, some users think sandwich attacks motivate the community to develop better product to prevent security challenges, which is also good for the development of the DeFi community.
Our last findings are mitigation needs, we summarize four design implications for mitigation tools.
First, mitigation tools need to get to the root of the problem.
This means improving users' awareness. Otherwise, users would not realize the severity of the problem and do not know how to adjust their trading behaviors.
Second, as we show earlier, transactions are not executed immediately in the blockchain. Therefore users expect mitigation tools can find sandwich attacks in real time and help them to cancel victim transactions.
Third, users would like to have an automated trading tool.
User want mitigation tools to help them decide and perform mitigation strategies automatically.
Finally, users want mitigation tools not limited to a single DeFi market, but can also support trades for other markets, especially for emerging markets where most attackers are located.
So that's all my talk today.
Thank you very much for your time and your patience.
We also have some other interesting findings that have not been presented today, and it is always welcome to discuss with all authors later.
Thank you.