Smart Contract Vulnerabilities Unveiled: Flash Loan Attacks

Decentralized Finance (DeFi) has revolutionized the financial world by enabling users to engage in financial activities without intermediaries. However, this innovation also introduces new vulnerabilities, one of which is the flash loan attack. In this article, we will explore what flash loan attacks are, provide examples of vulnerable code, and explain how to mitigate these risks.

What is a Flash Loan Attack?

A flash loan attack occurs when an attacker takes out a flash loan (a type of uncollateralized loan) and uses it to manipulate the market or exploit vulnerabilities in smart contracts. Flash loans must be repaid within the same transaction, making them a powerful tool for attackers to quickly execute complex strategies.