What Is a Flash Loan and How Does It Enable a Price Feed Attack?
A flash loan is a type of uncollateralized loan that must be borrowed and repaid within the same blockchain transaction. This allows an attacker to borrow a massive amount of capital without any upfront collateral.
The attacker uses the borrowed funds to execute a large trade on a DEX, causing a temporary, significant price deviation. The manipulated price is then fed to the vulnerable smart contract by the oracle, enabling the attack before the flash loan is repaid and the transaction is finalized.
Glossar
Uncollateralized Lending
Risk Exposure ⎊ ⎊ Uncollateralized lending within cryptocurrency, options, and derivatives markets represents an extension of credit without a corresponding asset held to mitigate potential losses, fundamentally altering counterparty risk dynamics.
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.
Price Feed
Feed ⎊ A price feed is a continuous stream of real-time pricing data from various sources used to determine the fair value of an asset.