Let your darkest thoughts come forth and tell us how would you break the platform, commit a financial crime, completely depeg h2o, abscond the funds, manipulate the building legos of finance and crash the system
I’ll start. The marginal price of the transaction prices the whole supply of collateral, if one were to run up the price of collateral through a series of loans and repledges he could theoretically take control of an inordinate amount of collateral and collateral rewards.
Crypto markets are incredibly reflexive, as prices rise more and more people chase up the price. Once liquidity builds up enough it is possible to sell out that extremely leveraged position into the rally thereby completely crashing the market and making out like a bandit.
If there is enough leverage in the system then liquidation arbitrageurs might not have enough liquidity to guarantee that the h2o peg stays whole.
How is defrost protecting itself from a cascading liquidation events?
What are the metrics that we have to look into?
How would one pull from onchain data how much leverage people are using?
here is a good article for fun and for profit.
Attacking the DeFi Ecosystem with Flash Loans for Fun and Profit (hackingdistributed.com)