Flash loan attacks are among the most dangerous threats facing decentralized finance (DeFi) protocols, as attackers exploit the ability to borrow large sums without collateral, executing complex operations in a single transaction and achieving illicit profits.
🧠 How do attacks happen?
The attacker borrows a large amount through a flash loan.
Exploits vulnerabilities in smart contracts or manipulates prices on trading platforms.
Repays the loan in the same transaction, realizing profits from price differences or vulnerabilities.
📉 Real-world examples:
bZx Protocol (2020): Suffered two consecutive attacks that exploited vulnerabilities in relying on a single price source, resulting in losses exceeding $985,000.
Harvest Finance (2020): A vulnerability in the pricing mechanism was exploited, leading to losses of nearly $130 million.
Cream Finance: Experienced an attack that resulted in losses exceeding $130 million, where attackers exploited vulnerabilities in smart contracts.
🛡️ Tips for investors:
Avoid projects that rely on a single price source (Single Oracle).
Ensure there is a recent and reliable security audit of the smart contracts.
Monitor governance activity, especially in projects that allow voting with tokens.
Use wallets that support security alerts and monitor suspicious activities.
📌 Summary:
While flash loans provide opportunities for legitimate profit, they are a double-edged sword that can be exploited in devastating attacks. Awareness of the risks and taking preventive measures are crucial to protect your investments in the DeFi world.
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