Binance uncovers "design flaw attack" for Augur prediction markets

A design flaw in Augur allows ambiguous prediction markets to be gamed for profit, according to Binance Research.

The report detailed other issues that "Plagued" the Augur platform, including prediction market wash trading, low liquidity, and limited participation rates.

1st report, Binance Research has uncovered a myriad of issues with Augur, the Ethereum-based decentralized prediction-market platform, including evidence of wash trading on prediction markets, limited user participation rates, low liquidity, and a concerning design flaw where attackers can potentially scam honest users.

The flaw revolves around creating prediction market that resolve as "Invalid." According to the Augur white paper, an invalid market is one that is "Not suitable for resolution by the platform-for example, because it is ambiguous, subjective, or the outcome is not known by the event end date."

These invalid markets are sometimes difficult to identify.

Because some prediction market outcomes differ in probability, the cost of betting on each outcome also differs.

Market behavior indicates that the cost of these bonds is low enough where users can "Repeatedly create bogus markets at a fixed cost," according to Binance Research.

1) Almost all of these purposefully confusing markets are being created by one person, not a bunch of people.

The activity on those markets is also by one person / address.

So markets where this is happening can be easily filtered out, and people trying to do the attack described in the OP would auto trigger the filter by virtue of their trading invalid.