What Is a “Flash Loan” and How Is It Used in Conjunction with Oracle Manipulation?

A flash loan is an uncollateralized loan that must be borrowed and repaid within the same blockchain transaction. Attackers use flash loans to borrow a massive amount of assets, which they then use to temporarily manipulate the price on a decentralized exchange (DEX).

This manipulated price is then fed to a vulnerable oracle or used to trigger a profitable trade on a derivatives platform, all before the loan is repaid. This single-transaction attack is a form of front-running that exploits smart contract logic and oracle reliance.