What Is the Flash Loan Attack Vector in Liquidation?

The flash loan attack vector involves using a large, uncollateralized loan (a flash loan) to manipulate the price of the collateral asset on a decentralized exchange (DEX) just long enough to trigger a massive, profitable liquidation event. The attacker uses the temporary price change to trigger liquidations at the manipulated price, profiting from the collateral sold in the auction, and then repays the flash loan in the same transaction.

This attack targets oracle reliance and low liquidity.