What Is a Flash Loan and How Can It Be Used to Amplify a Sandwich Attack?
A flash loan is a type of uncollateralized loan in DeFi that must be borrowed and repaid within the same blockchain transaction. An attacker can use a flash loan to amplify a sandwich attack by borrowing a massive amount of capital to execute the 'buy' part of the sandwich.
This large, borrowed trade creates a huge price impact, maximizing the profit from the victim's trade. The attacker repays the loan in the same transaction, never needing to put up collateral.
Glossar
Sandwich Attack
Attack ⎊ Sandwich Attack is a specific form of front running where an attacker executes a buy order immediately before a victim's large intended buy order and then executes a sell order immediately after, effectively sandwiching the victim's transaction between two profitable trades for the attacker.
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.