What Is a Flash Loan and How Does It Facilitate Oracle Manipulation?
A flash loan is a type of uncollateralized loan that must be borrowed and repaid within the same blockchain transaction. They are facilitated by smart contracts.
The loan allows an attacker to instantly acquire a large amount of capital. This capital is then used to manipulate the price of an asset on a low-liquidity DEX, creating a temporary, artificial price spike or dip.
The oracle reads this manipulated price before the transaction concludes and the loan is repaid.
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.
Flash Loan Attacks
Attacks ⎊ Flash Loan Attacks exploit the nature of uncollateralized, atomic loans to manipulate asset prices temporarily on a single blockchain transaction, allowing the attacker to profit from arbitrage or oracle manipulation before repaying the loan.