How Do Flash Loan Attacks Differ from Legitimate Flash Loan Arbitrage?

The key difference lies in intent and mechanism. Legitimate flash loan arbitrage exploits natural price differences between markets to make a profit.

A flash loan attack, however, exploits vulnerabilities in a DeFi protocol's smart contract. The attacker uses the massive capital from a flash loan to manipulate prices or other logic within the vulnerable protocol, with the goal of draining its funds, rather than profiting from a simple trade inefficiency.