Augur is facing a huge problem- an ‘invalid market’ scam that could make it update its smart contracts to avoid fraudsters profiting by exploiting the system. The blockchain-based marketplace is designed for prediction betting and allows any user to create a market on any subject. The token holders have to arrive at a consensus over the outcome of the bet in a market. The system of smart contracts then distributes winnings. This system is being conned by attackers.
Augur needs to solve its problems, now!
The decentralized betting protocol Augur has a serious situation. If it doesn’t bring a major update to its platform soon, fraudsters will be making profits by gaming the system, and the developers won’t be able to do anything about it. The fraud actors are creating invalid markets in large numbers, which fools the system and makes it distribute profit mistakenly to the attackers. The community is concerned that scammers are taking over the platform, forcing Augur co-founder Joey Krug to address these concerns.
An invalid market looks exactly like a regular market and encourages users to bet their tokens on a particular outcome. However, these fraud markets usually expire before the event being bet upon is triggered. This makes the system distribute profits incorrectly even though the attackers make incorrect bets. The Augur community terms these as “invalid” markets and the attackers usually bet on impossible outcomes and vote to make the market invalid.
What is Augur doing for the problem?
Augur tried to fix the problem using “validity bonds” that work as collaterals making Augur confiscate winnings if users cheat the market. Hard Fork talked to co-founder Krug about the problem. He said,
“With validity bonds, the idea is you lose money if you create an invalid market. But right now, the formula to calculate them isn’t working properly.”
Augur developers are having a hard time deciding the money lost via these invalid markets as the algorithm that decides it hasn’t been configured correctly. However, changing it won’t be a small patch. Users will have to wait for Augur 2.0 as it demands change to the Augur smart contract code.
“Right now, they don’t lose much, and the system is supposed to raise that amount over time until the number of invalid markets decreases, but that’s buggy, so that will be fixed,” said Krug.
Krug also said that they have another fix for the time being- allowing trading on whether a market is valid or not. This will make the attacker bid constantly and trigger a UI filter to alert users. However, it can’t be done if an on-contract update is not made available.