Fjord Token Staking

Summary

Lack of restrictions during unbid can be used to exploit auction fairness.

Proof of Concept

Consider the following scenarios,

SCENARIO 1

Auction Start: The auction starts with no bids. The total number of auction tokens (totalTokens) is set to 1,000 tokens.

Auction End Time: The auction will run for 7 days.

Day 1: Bob bids 500,000 FjordPoints. At this point:

totalBids = 500,000 FjordPoints.

Other participants see that Bob has placed a large bid and decide to stay away from the auction as the share calculated by the multiplieris going to be very small.

Day 7 : Bob unbids (withdraws majority of the bid)

Right before the auction ends ,
Bob withdraws majority of his bid (say 99% of his FjordPoints)
leaving only a small amount.

say totalBids = 500 FjordPoints.

In this case, the other potential participants dont have the time
to react or bid based on this massive change in auction dynamics.

SCENARIO 2

Another example of manipulation could be when a manipulator lures other participants to bid more than they intended by signaling strong competition for the auction tokens by bidding large amounts and withdrawing right before the auction ends.

Perception Manipulation:
Bob’s withdrawal right before the end caused the final distribution to be different from what participants might have expected when they planned their bids.

Impact

Users can manipulate the auction dynamics and fairness of auction
due to lack of any restriction during withdrawal thru unbid.

Tools Used

Manual Review

Recommendations

Partial Withdrawals:
Limit the amount a user can withdraw to a certain percentage of their bid to prevent complete withdrawal manipulation.

Lock Periods:
Restrict withdrawals in the last few hours of the auction to prevent last-minute changes.

Withdrawal Penalty:
Implement a penalty (e.g., a percentage of the withdrawn amount) for users who unbid to discourage manipulation.