Polymarket faced a governance attack where a UMA tycoon manipulated oracle voting, falsely settling a market on Ukraine’s mineral deal, costing $7 million. The tycoon used 5 million UMA tokens, exposing voting system flaws. Let’s explore solutions to address Oracle Market vulnerabilities and similar case studies.
Overview about the Polymarket Case Studied
The recent governance attack on Polymarket, a decentralized prediction market, has raised significant concerns about oracle manipulation and the integrity of decentralized voting systems. This incident, occurring between March 24 and 25, 2025, involved a UMA tycoon allegedly using concentrated voting power to settle a $7 million contract falsely, prompting discussions on enhancing security. Orochi, a blockchain infrastructure provider, proposes solutions through its zkDatabase and zkDA Layer, aiming to prevent data manipulation and ensure transparency. This note explores the event, analyzes vulnerabilities, and details Orochi's technologies, providing a comprehensive overview for stakeholders.
Polymarket operates by allowing users to bet on outcomes, with contracts resolved based on oracle data. In this case, the contract "Will Ukraine agree to Trump's mineral deal before April?" saw its odds manipulated from 9% to 100%, resolving as "Yes" despite no official agreement. This manipulation was facilitated by a UMA tycoon who cast 5 million UMA tokens through three accounts, representing 25% of total votes. Polymarket's system allows proposers to stake 750 USDC.e for outcomes, with disputes resolved by UMA token holder votes. The attack highlighted how concentrated voting power can override decentralized checks, leading to fraudulent resolutions.
Why Oracle Prices Were Easily Manipulated
The Oracle system in Polymarket relies on proposers staking 750 USDC.e to submit outcomes, with UMA token holders voting if disputed. However, concentrated voting power, as seen with the tycoon's 25% control, allowed manipulation. This vulnerability stems from the decentralized yet influenceable nature of the voting process, where large token holders can sway results, especially in less contested contracts. Here the reasone why Oracle prices can be easily manipulated:
Security Vulnerabilities
With Oracles being potential targets for hacking. In March 2025, CloudSEK researchers reported a threat actor, “rose87168,” claiming to have exploited a vulnerability (CVE-2021-35587) in Oracle Cloud’s login infrastructure, allegedly stealing 6 million records and impacting over 140,000 tenants. The stolen data included JKS files, encrypted SSO and LDAP passwords, and JPS keys, with the attacker demanding payments. Despite Oracle’s denial, SecurityWeek noted evidence supporting the breach, highlighting Oracle security risks. This incident underscores the need for robust security measures, especially as onchain value grows.
Centralization Concerns
Centralized oracles pose a single point of failure, undermining decentralization. An example is a DeFi protocol where a centralized oracle was compromised through an attack on the whitelisted agency managing it, acting as a single point of failure. This manipulation of price feeds disrupted smart contract executions, as noted in a Datafloq article discussing oracle risks (Datafloq). This case shows how centralization can be exploited, contradicting blockchain’s trustless ethos, and highlights the need for decentralized alternatives.
Scalability and Performance
Scalability issues arise when Oracles struggle under high transaction loads, leading to delays or high costs. In November 2020, Compound, a DeFi lending platform, experienced a $89 million liquidation event due to delayed oracle data from CoinbasePRO. The Oracle fed a wrong DAI price ($1.3 instead of ~$1), triggering forced liquidations, as reported by beincrypto. This example shows how latency can impact performance, particularly in high-stakes DeFi applications, and reflects broader scalability challenges on networks like Ethereum.
Regulatory Uncertainty
Regulatory uncertainty affects oracle-based prediction markets, operating in legal gray areas. In 2018, Augur, a decentralized prediction market, faced scrutiny from U.S. regulators for allowing bets on events like whether President Trump would be killed in July or the rest of 2018, reported by Insurance Journal. This raised legal concerns, with the platform’s decentralized nature making it hard to regulate, highlighting the challenge of navigating gambling and derivatives laws.
Interoperability Challenges
Interoperability issues arise when oracles struggle to work across different blockchains. An example is a DeFi protocol on Ethereum facing delays in accessing oracle data from a Polygon-based prediction market, requiring manual bridging and slowing smart contract execution.
Orochi's Solution - zkDatabase and zkDA Layer
Orochi Network offers a potential solution through its zkDatabase and zkDA Layer, leveraging Zero-Knowledge Proofs to prevent data manipulation. The zkDatabase verifies data integrity by ensuring inputs are tamper-proof, while the zkDA Layer provides a decentralized, transparent data availability layer, reducing reliance on centralized Oracles. This could enhance Polymarket's security by ensuring verifiable, unmanipulable data for contract resolutions.
zkDatabase:
is a noSQL database built on a Merkle DAG-based distributed storage system, a structure that ensures data is both efficiently accessible and inherently secure. What sets zkDatabase apart from traditional databases is its integration of ZKP circuits, which validate every operation—whether it’s ingesting new data, querying existing records, updating entries, or modifying the schema. Each action within zkDatabase produces a cryptographic proof that external systems, such as smart contracts or regulatory bodies, can independently verify. In essence, zkDatabase is a self-proving data store, eliminating the need to trust the database operator while guaranteeing data integrity.
zkDA Layer:
zkDA Layer (Zero-Knowledge Data Availability Layer) is a next-generation Data Availability Layer (DAL) that integrates Zero-Knowledge Proofs (ZKPs) to enhance security, verifiability, and scalability in blockchain networks.
The Impact of Applying zkDatabase and zkDA Layer to Solve Oracle Market Problems
The integration of Orochi Network's zkDatabase and zkDA Layer into oracle-based systems like Polymarket offers a transformative approach to addressing the vulnerabilities exposed in the recent governance attack. By leveraging Zero-Knowledge Proofs (ZKPs), these technologies tackle the core issues of data manipulation, centralization, and scalability that plague decentralized prediction markets.
The zkDatabase ensures data integrity by cryptographically verifying every operation—ingesting, querying, or updating—within a tamper-proof, Merkle DAG-based structure, eliminating the risk of fraudulent inputs.
Meanwhile, the zkDA Layer enhances decentralization and transparency by providing a secure, verifiable data availability framework, reducing reliance on centralized Oracles and mitigating the influence of concentrated voting power, as seen with the tycoon’s 25% control of UMA votes. Together, our solutions could prevent manipulation by ensuring that contract resolutions are based on unalterable, trustworthy data, while also improving scalability to handle high transaction loads without latency-induced errors, such as those observed in past DeFi incidents like Compound’s $89 million liquidation.
This dual-layered approach not only strengthens security but also aligns with blockchain’s trustless ethos, offering a robust defense against the types of exploits that undermined Polymarket’s integrity.
Closing Though
The Polymarket governance attack underscores the fragility of oracle-dependent systems in decentralized markets, where trust and accuracy are paramount. Orochi’s zkDatabase and zkDA Layer present a compelling solution, harnessing the power of Zero-Knowledge Proofs to fortify data integrity and decentralize oracle processes. By implementing these technologies, platforms like Polymarket can safeguard against manipulation, enhance transparency, and restore confidence among users and stakeholders. As the blockchain ecosystem evolves, adopting such innovative tools will ensure that decentralized prediction markets fulfill their promise of fairness and reliability in an increasingly complex digital landscape.
Risk Disclaimer: This article is purely objective and for illustrative purposes only, with absolutely no intent of opposition or challenge in any form!
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