Risks & Security
Flash Loan Attack
Attack using flash loans to manipulate protocols for profit
Definition
Flash loan attacks use uncollateralized loans to manipulate DeFi protocols, often involving price manipulation, arbitrage exploitation, or governance attacks within a single transaction.
Example
An attacker uses flash loans to manipulate an oracle price, borrow against inflated collateral, then repay the flash loan while keeping the stolen funds.
What to check
Treat it as a risk term: identify the failure mode, who can be harmed, and what evidence would reduce that risk. The main checks are: Protocol drainage; Market manipulation; Cascading failures.
Risks to Consider
- Protocol drainage
- Market manipulation
- Cascading failures
Common Questions
What does Flash Loan Attack mean in DeFi?
Flash Loan Attack means Attack using flash loans to manipulate protocols for profit. The useful question is not only the definition, but how the mechanism changes risk, return, liquidity, or governance for the user.
How is Flash Loan Attack used in practice?
A practical example: An attacker uses flash loans to manipulate an oracle price, borrow against inflated collateral, then repay the flash loan while keeping the stolen funds.
What should I check before relying on Flash Loan Attack?
Check protocol drainage, market manipulation, cascading failures. Also verify liquidity, oracle assumptions, admin controls, and whether the protocol has been tested during stressed markets.
