Last night, the prediction market Polymarket, which had exploded during the U.S. election, encountered the most serious manipulation attack since its establishment, resulting in a prediction pool with a betting scale of over $7 million giving an incorrect result determination. Ultimately, users who bet on the correct outcome suffered heavy losses, while those who bet on the incorrect outcome took away all the funds in the prize pool.
The involved prediction pool was 'Will Ukraine reach a rare earth trade agreement with Trump before April?' In the real world, the U.S. and Ukraine have not yet reached an agreement on this transaction, so the determination result of this prediction pool should be 'No.' However, as shown in the figure below, the determination result of this prediction pool unexpectedly turned to 'Yes' before settlement, ultimately leading to this upside-down situation.
Image Source: Polymarket
Why did this situation occur? The answer lies in Polymarket's determination mechanism. Polymarket relies on the oracle $UMA to determine the results of events, and its determination process is as follows:
Result Report: After the event occurs, anyone can report the result to $UMA.
Dispute Window: After submitting the report, there will be a dispute period during which anyone who believes the report is incorrect can raise a dispute. If no one disputes, the report result will be accepted; if there is a dispute, the $UMA dispute resolution mechanism will determine the final result.
Dispute Resolution: $UMA token holders must vote to determine the correct result; $UMA will incentivize honest behavior and punish malicious behavior.
According to the process records from Polymarket, the prediction pool has ultimately reached the third step of the process, meaning that someone has disputed the results of the original report, so a $UMA vote is needed to determine the final outcome.
Image Source: Odaily Planet Daily
According to the final voting results from $UMA, 54.6% of the votes disregarded the facts and chose 'Yes,' forcefully pushing the prediction pool to determine the final result as 'Yes.'
Image Source: Odaily Planet Daily
According to Reddit user @iamtheone's records, another option 'It's too early to conclude' once held an advantage in the early stages of the $UMA vote, but in the final stage, a mysterious force invested millions of $UMA into the 'Yes' option, forcefully changing the voting result.
At the same time, the price of $UMA also inexplicably surged 24% on March 22, and then gradually fell back, which may indicate that this mysterious force had already prepared a plan days ago.
Image Source: Odaily Planet Daily
This Reddit user added that this is not the first oracle manipulation incident on Polymarket; the platform has previously experienced several small-scale market manipulations (such as determining the Venezuelan president as Edmundo González, claiming Trump audited Fort Knox), but this time the amount involved is the largest, with a total betting amount exceeding $7 million.
The key reason for this incident is that the $UMA voting mechanism, which Polymarket relies on to make final decisions, only imposes a 0.05% penalty for incorrect votes, making the cost of wrongdoing extremely low. Faced with the enormous potential profits of reversing the facts, fraudsters have ample motivation to manipulate the oracle.
Even more shocking, Polymarket officials announced this morning on Discord that they are aware of this unexpected situation but cannot provide refunds to users.
We have been informed of the abnormal situation in the Ukraine rare earth agreement prediction market. The settlement result of this market contradicts user expectations and our previous clarifications. Since this incident does not constitute a system failure, we cannot proceed with a refund operation. The current situation is unprecedented. We have initiated emergency meetings with the $UMA team around the clock to ensure that such incidents do not happen again. This is certainly not the future we want to build — we will establish a more comprehensive system monitoring mechanism, formulate a clearer rules framework, and optimize a more timely clarification process. Specific measures will be announced gradually after a thorough assessment.
It is not hard to imagine that Polymarket's response was soon met with public criticism from the community; the comment section below the original prediction pool has accumulated 5,554 comments, with numerous users criticizing Polymarket's mechanism and response.
As one of the most stunning projects in the entire cryptocurrency market last year, Polymarket clearly does not lack funds to fully compensate; such a response will inevitably damage its market credibility and community sentiment. Considering the current heated community emotions, whether the subsequent situation can have room for maneuver remains to be seen, and Odaily Planet Daily will continue to follow up in real-time.
This article is authorized for reprint from: (Deep Tides TechFlow)
Original Author: Azuma, Odaily Planet Daily
'Polymarket Attacked! $7 Million Pool Misjudged, Big Players Can Use Voting Rights to Reverse Truth' was first published in 'Crypto City'