Liquidity Pool Skewing

Liquidity pool skewing involves intentionally disrupting the balance of assets within an automated market maker pool to alter the quoted price. Automated market makers use mathematical formulas to determine asset prices based on the ratio of tokens in a liquidity pool.

An attacker can perform a large swap, removing one asset and adding another, which shifts the ratio and forces the price to move in a desired direction. If the protocol relies on this specific pool as a primary price source, the skewed price becomes the basis for subsequent financial operations.

This allows the attacker to interact with other parts of the protocol at the distorted price to extract value. It highlights the inherent risks of relying on isolated liquidity pools for price discovery.