How Does an Attacker Profit from a Successful Oracle Manipulation Using a Flash Loan?
The attacker profits by exploiting a DeFi protocol's reliance on the temporarily manipulated price. For example, they can use the artificially inflated price of a token as collateral to borrow a large amount of another asset.
Once the loan is executed, the flash loan is repaid, the manipulated price reverts, and the attacker is left with the borrowed assets, which they do not have to repay due to the under-collateralized position.
Glossar
Oracle Manipulation
Vulnerability ⎊ Oracle manipulation, within cryptocurrency, options, and derivatives, represents systemic risk arising from compromised data feeds informing contract execution.
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.
Attacker Profit
Motive ⎊ Attacker Profit represents the quantifiable financial gain realized by an entity executing a malicious or exploitative trading strategy, such as frontrunning or market manipulation.
Flash Loan Attack
Exploitation ⎊ A flash loan attack represents a market manipulation technique enabled by decentralized finance (DeFi) protocols, specifically leveraging the ability to borrow substantial capital without collateral requirements, contingent upon full repayment within a single transaction block.