The prominent decentralized crypto prediction platform is currently facing criticism after it resolved a politically sensitive market that contradicts ongoing real-world events.
On March 25, the platform finalized a $7 million market that inquired whether U.S. President Donald Trump would finalize a rare earth minerals deal with Ukraine by the end of March.
Despite the absence of a confirmed agreement, the platform resolved the market in favor of the proposition, which led to a backlash from users.
This decision has raised significant questions regarding the reliability of its Oracle system and the perils associated with token-based governance.
What occurred?
Reports indicate that the erroneous resolution was linked to the manipulation of the platform’s oracle partner, UMA Protocol.
Wu Blockchain reported that a single whale allegedly employed three wallets to cast 5 million UMA tokens—approximately 25% of the total votes. This granted the individual substantial sway over the outcome.
UMA functions as an optimistic oracle, allowing token holders to vote on contentious outcomes, with those holding more tokens wielding greater voting power.
While this method promotes decentralization, it also makes the system susceptible to manipulation, particularly when voter participation is low. This implies that a relatively modest amount of capital could potentially influence results, especially when the oracle oversees larger liquidity pools.
0xngmi, the pseudonymous founder of DefiLlama, pointed out this concern, noting that 51% of UMA’s market cap is valued at $63 million, which is outmatched by the platform’s $120 million in total value locked.
According to 0xngmi, this disparity puts the system at risk, as a relatively small investment in UMA could determine outcomes impacting much larger amounts.
Responses from the platform and UMA
The platform recognized the issue and termed the situation as “unprecedented.”
It stated that its internal teams and UMA have been tirelessly investigating and implementing protective measures.
A representative for the platform commented:
“This is not the future we want to create: we are committed to developing systems, monitoring, and additional measures to ensure this does not happen again.”
Although there were requests for refunds, the platform clarified that the market was resolved in accordance with its protocol, and users would not receive reimbursements.
UMA shared the platform’s viewpoint and confirmed that both teams are closely reviewing the situation. They promised enhancements in the future to uphold market integrity and restore user confidence.
The platform added:
“We are collaborating with Polymarket to enhance the user experience for both oracle and market participants.”
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