How Does a Flash Loan Attack Exploit a Simple Spot Price Oracle?
A flash loan attack involves a malicious actor taking a massive, uncollateralized loan and using it to briefly manipulate the price of an asset on a low-liquidity DEX. If the smart contract uses this single, simple spot price oracle, the manipulated price is fed to the contract.
The attacker then executes a profitable trade (like a liquidation or arbitrage) based on the false price before repaying the loan in the same transaction.
Glossar
Flash Loan Attack
Exploit ⎊ A flash loan attack leverages the permissionless and composable nature of decentralized finance (DeFi) protocols to execute a series of transactions within a single, fleeting block, often exploiting arbitrage opportunities or manipulating market prices.
Flash Loan
Mechanism ⎊ A flash loan represents an uncollateralized loan executed entirely within a single blockchain transaction, enabling borrowers to access substantial capital for a very short duration, typically seconds.
Exploit
Vulnerability ⎊ Within cryptocurrency, options trading, and financial derivatives, a vulnerability represents a systemic weakness in a protocol, smart contract, or trading infrastructure that can be leveraged to gain an unfair advantage or inflict financial harm.
Simple Spot Price
Valuation ⎊ The Simple Spot Price in cryptocurrency derivatives represents the current market consensus of an asset’s value for immediate delivery, functioning as a foundational element for pricing more complex instruments.