1 day ago
Mantra and associated marketplace makers allegedly manipulated liquidity metrics for the OM token by exploiting vulnerabilities successful information aggregators’ self-reporting systems, according to discussions connected the latest edition of “The Chopping Block” podcast.
The strategy progressive misrepresenting the circulating proviso and trading measurement of OM to make the quality of broader marketplace enactment than existed.
Podcast participants explained that the Mantra squad worked with marketplace makers to simulate trading volume. This progressive cycling tokens among controlled addresses and exchanges to inflate measurement figures without important integrated participation.
As a result, OM appeared to beryllium a top-25 plus by marketplace capitalization contempt little than 1% of the token proviso being genuinely liquid, according to on-chain observers.
The maneuver relied connected gaps successful CoinGecko and CoinMarketCap’s validation processes. Both platforms chiefly beryllium connected self-reported information from task teams, cross-referenced with listings connected large exchanges and surface-level blockchain analytics.
However, motivated actors tin circumvent these checks by allocating tokens to marketplace makers and orchestrating on-exchange enactment that superficially mirrors integrated trading, adjacent erstwhile retail information is absent.
The fabricated liquidity collapsed erstwhile a ample OM holder attempted to liquidate, triggering a 90% terms diminution wrong 90 minutes. As participants successful the podcast noted, the incidental erased billions successful marketplace capitalization and exposed the fragility of the asset’s existent trading depth.
Potential solutions
Industry figures projected respective solutions to code the loopholes that enabled the OM incident.
One proposition was to necessitate the disclosure of each market-making agreements arsenic a information for listing tokens connected large exchanges, specified arsenic Binance and Coinbase.
Transparent disclosure would uncover if the enactment for the trading measurement is simply a genuine organisation oregon chiefly orchestrated done incentivized liquidity arrangements.
This conception mirrors practices successful accepted finance, wherever securities filings disclose market-making contracts for nationalist equities.
In crypto markets, specified disclosures would request to see rebate structures, indebtedness terms, inventory hazard responsibilities, and immoderate measurement guarantees provided by marketplace makers.
Another solution discussed was enhanced verification of token organisation claims. Exchanges and information aggregators could instrumentality stricter on-chain validation standards, including wallet audits and assessments of wallet ownership concentration, to guarantee that reported circulating supplies are independently verifiable.
Challenges
However, participants acknowledged imaginable challenges. Market makers whitethorn defy disclosures to support proprietary arrangements, and exchanges could look higher operational costs.
Additionally, determination is besides a hazard that enforcement without regulatory backing could pb to uneven adoption crossed platforms, creating opportunities for atrocious actors to exploit arbitrage.
Despite these hurdles, the statement connected the podcast was that coordinated enactment by large exchanges could substantially mitigate the issue.
If starring venues mandated transparency for caller listings, projects seeking morganatic liquidity entree would person beardown incentives to comply, perchance driving retired practices that undermine idiosyncratic spot and marketplace stability.
The illness of OM and the allegations surrounding its liquidity practices person renewed scrutiny connected information reporting standards crossed the crypto industry.
The station Mantra, marketplace makers allegedly exploited validation gaps to inflate OM token liquidity appeared archetypal connected CryptoSlate.
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