Governance Attack on UMA Oracle Raises Concerns in Prediction Markets

According to CoinDesk, a rogue actor operating from the Ethereum wallet 'BornTooLate.Eth' has executed a governance attack on UMA, a decentralized oracle protocol utilized by Polymarket. This attack targeted the outcome of a Ukraine-themed contract by becoming one of the largest holders of UMA tokens. UMA, known for its 'optimistic' approach, allows token holders to vote on disputed outcomes in prediction markets. It has faced criticism for its subjective resolutions in controversial markets, including Barron Trump's involvement in a Presidential meme coin, the OceanGate submarine incident, and Venezuela's contested election. On-chain data reveals that BornTooLate.eth possesses approximately 1.3 million UMA tokens, ranking them among the top five governance stakers and granting them substantial influence over UMA dispute resolutions. In the Ukraine-themed market attack, the contract invited bettors to speculate on the possibility of a deal granting U.S. access to Ukraine's rare earth resources by the end of March. Despite reports of ongoing negotiations, no deal has been signed. However, the market resolved to 'yes' after BornTooLate.Eth leveraged their staked UMA tokens to vote 'yes' on the resolution. Interestingly, this governance attack did not result in significant financial gains for the participants. Market data from Polymarket Analytics indicates that the largest winner from the contract earned just over $55,000, while the biggest loser forfeited approximately $73,000. An etherscan page for BornTooLate.Eth shows that the actor began accumulating UMA tokens over a year ago, with their holdings exceeding 1.3 million tokens, costing over $2 million to build such a treasury for the attack. Polymarket has stated that no refunds will be issued, as this incident is not considered a 'market failure.' In a Discord statement, Polymarket expressed its commitment to collaborating with the UMA oracle team to prevent similar occurrences in the future. "This market resolved against the expectations of our users and our clarification," a spokesperson posted on Discord. "We’re committed to building the future of prediction markets, which requires building resilient systems in which everyone can trust." Polymarket founder Shayne Coplan did not immediately respond to a request for comment.