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.
Glossar
Flash Loan
Mechanism ⎊ A flash loan represents an uncollateralized loan executed entirely within a single blockchain transaction, enabling borrowers to access substantial capital for a very short duration, typically seconds.
Flash Loan Attack Vector
Exploit ⎊ A Flash Loan Attack Vector represents a transient, yet potent, mechanism for manipulating decentralized finance (DeFi) protocols, leveraging the ability to borrow substantial capital without collateral requirements.
Flash Loan Attack
Exploit ⎊ A flash loan attack leverages the permissionless and composable nature of decentralized finance (DeFi) protocols to execute a series of transactions within a single, fleeting block, often exploiting arbitrage opportunities or manipulating market prices.