Stackelberg Attack on Protocol Fee Governance
Alexandre Hajjar
TL;DR
This paper models a strategic attack on AMM governance using Stackelberg game theory, demonstrating how Liquidity Providers can exploit forking and commitments to influence protocol outcomes.
Contribution
It introduces a dynamic, block-by-block model of AMM reserves and trading volume under competing forks, analyzing equilibrium conditions and strategic moves with smart contracts.
Findings
Identifies conditions under which Stackelberg attacks are profitable.
Provides a framework for analyzing AMM governance vulnerabilities.
Suggests strategic considerations for protocol design to mitigate attacks.
Abstract
We establish a Stackelberg attack by Liquidity Providers against Governance of an AMM, leveraging forking and commitments through a Grim Forker smart contract. We produce a dynamic, block-by-block model of AMM reserves and trading volume in the presence of competing forks, derive equilibrium conditions in the presence of protocol fees, and analyze Stackelberg equilibria with smart contract moves.
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Taxonomy
TopicsAdvanced Authentication Protocols Security