Balancing Security and Liquidity: A Time-Weighted Snapshot Framework for DAO Governance Voting

TL;DR

This paper addresses the challenge of balancing security and liquidity in DAO governance by proposing a time-weighted snapshot framework to mitigate flash loan attacks, enhancing voting security.

Contribution

It introduces a novel time-weighted snapshot framework for DAO voting, providing a new defense mechanism against flash loan attacks with practical case applications.

Findings

The proposed framework effectively reduces vulnerability to flash loans.

Case studies demonstrate improved security in DAO voting processes.

Identifies weaknesses in existing defense mechanisms.

Abstract

As new project upgrading the blockchain industry, novel forms of attack challenges developers to rethink about the design of their innovations. In the growth stage of the development, Decentralized Autonomous Organizations (DAO) introduces different approaches in managing fund through voting in governance tokens. However, relying on tokens as a weight for voting introduces opportunities for hackers to manipulate voting results through flash loan, allowing malicious proposals - fund withdrawal from DAO to hacker's wallet - to execute through the smart contract. In this research, we learned different defense mechanism against the flash loan attack, and their weakness in accessibility that compromise the security of different blockchain projects. Based on our observation, we propose a new defensing structure and apply it with cases.