Can a Centralized Exchange (CEX) Be Exploited Using a Flash Loan?
A CEX cannot be directly exploited using a standard flash loan because CEXs operate on their own internal, centralized order books and are not governed by the same smart contract logic as DeFi protocols. Flash loans operate exclusively within the logic of a DeFi blockchain network.
However, a flash loan can be used to manipulate the price on a DEX, and if a CEX's derivative product or margin trading system relies on that manipulated DEX price feed, the CEX could be indirectly affected.
Glossar
Smart Contract Logic
Execution ⎊ Smart contract logic, within cryptocurrency and derivatives, defines the automated enforcement of pre-defined agreements, eliminating intermediary risk and reducing operational costs associated with traditional contract management.
Flash Loan
Mechanism ⎊ A flash loan is a unique, uncollateralized loan mechanism in decentralized finance that allows users to borrow assets for a very short duration, typically within a single blockchain transaction.
Centralized Exchange
Intermediary ⎊ This refers to a regulated or semi-regulated entity that acts as a trusted third party, facilitating the custody of client assets and the matching of buy and sell orders for cryptocurrency and associated derivatives on a centralized order book.