Papertrade Responds to Price Manipulation and Protocol Vulnerability Concerns: Due to Loose Position Limits in Early Launch, Parameters Have Begun to Be Tightened
BlockBeats news, October 11: Papertrade officially responded to allegations of price manipulation exploitation and obvious vulnerabilities in the protocol, stating:
It has never been possible to give small orders the same priority as large orders. If this were done, the frontend would be congested with spam transactions, and the consequences would be far worse than the existing queuing mechanism. Under these constraints, the fair launch has been designed to be as inclusive as possible.
The manipulation attempt on BTC/ETH on Hyperliquid BBO last night was not an oversight in a mechanism designed over six months. These situations were already taken into account; they only occurred because, in the early stages after launch, position limits were set very loosely to cope with congestion. If position limits had been set during the peak demand period of the queuing launch, it would only have further worsened the slow experience, while the queuing mechanism itself, due to the uncertainty in opening/closing confirmation times, actually provides natural protection against manipulation. As congestion eases, position limits have already begun to be tightened on-chain and at the relay level. In such a system, manipulation attacks are always possible—the key is whether the attempt is economically worthwhile. The official goal is to set parameters so that it is almost never profitable, and even if successful, the tail risk is extremely high with a negative expected value.
Previous news: Papertrade is suspected of being exploited by two addresses through price manipulation, with obvious vulnerabilities in the protocol. The relevant addresses conducted trades on Hyperliquid with a single trade size of approximately $20 million, causing ETH price fluctuations of about 10 to 20 basis points, and established long positions with a notional value of hundreds of millions of dollars on Papertrade.
