Defi Manual: Part 4 - Market Manipulation

Defi Manual: Part 4 - Market Manipulation

By xuanling11 | Crypto Learning | 17 Sep 2021


Both Cefi and Defi will face market manipulation of some kinds.

 

Inflation manipulation in Cefi

Inflation is when the devaluation of an existing currency supply through additional more supply and sacrifice purchasing power of a currency.

 

The central bank in the Cefi system uses its power to control inflation to 2% as their preferable target. However, 2% is a myth after all since 1% of the rich controlled more money than the bottom 50% did and their incomes rose faster than the bottom 50% did too. 2% may work for the rich but not the bottom 50% as lumber prices in April 2021 increased 250% since last year while the central bank was working to contain inflation within 2%. 

 

While the central bank may find a way to print more money out of the trouble in the short term, people are looking for solutions in cryptocurrency like Bitcoin, which capped the supply to prevent the devaluation of its valuation. Ethereum also modified its supply by burning its quantity faster than the supply and creating a deflationary environment to prevent its devaluation.

 

Network manipulation in Defi

Defi will experience hits through network layer attacks or consensus layer attacks.

 

Network layer attacks

White hat hacked the Polynetwork, stole more than $600 million worth of tokens, and returned them to let the community know the dangers of codes.  

 

Consensus layer attacks

Bitcoin SV suffered 51% attack through nodes that control larger than 51% of the community’s hash fee and using majority energy to forestall block and even double-spend cash.

 

Outsiders attacked Cefi is harder 

With the protection of the Central Bank, the attacks are less likely to happen from the outsiders. However, it cannot prevent internal corruption.

 

Defi operates within Cefi

Purely Defi system may not exist, but Defi tuning within Cefi is common. So it may prevent both outside attacks and inside attacks. But the system corruption may never be able to stop.

 

In conclusion 

Cefi can easily prevent outsiders’ attacks, and Defi makes the system more secure if the system gears up with network security. However, corruption may never be avoided.


Photo by Mick Haupt on Unsplash
  

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