Now what can we do to prevent it? Is the first thought that came in a flash of the moment, Flash! Instant, this is what we described by analyzing the concept of flash loans, Flash loans are an easier way to get loans approved in the world of crypto trading.
This was the system introduced for those users who urgently need a loan that does not take a long period of processing and the involvement of third parties or who need to keep collateral, but as it is impossible to have all the active ingredients in one pull. To securely transfer bitcoins, you can visit sites like https://bitcoins-era.io/
Therefore, you have to compromise with the other factors in order to meet your basic need, but it can cost your entire savings and profits!
What Are Flash Loan Attacks?
Flash loan attacks are serious issues that are growing like weeds in the cryptocurrency realm, being unsecured and unregulated, they open up an easier way for cyber attackers to be targeted and, for example, therefore, they can manipulate the entire crypto market.
The attacks happen all of a sudden without any prior notification and without any harm to the attacker, they are one of the main DeFi attacks that are still difficult to spot and resolve in a matter of minutes.
Now, as we know that flash loans are the online loans given under the smart contract system, you can also refer to our previous article on flash loans where you can get an overview of this term.
How Are Flash Loan Attacks Deployed?
The flash loan attacks are executed through the major loopholes in the borrowing system like zero principal, no collateral, and most of the important factors are its instant sanctioning of loans.
This is a huge relief to attackers who are waiting for such a game-changing opportunity to execute their plans. Now, let’s see what are some real-time examples of flash loan attacks that have occurred over the past few years:
Real examples of Flash loan attacks
- PancakeBunny Flash Loan Attack
PancakeBunny is a yield farming aggregator that works on the binance smart chain network, it also introduced the system of flash loans which were self-automated and unregulated.
However, an anonymous attacker borrowed $ 45 million on May 19 and then used that amount to mine other cryptocurrencies.
Crushing the values of the Bunny tokens with them, which ultimately causes the value to drop by about 96%, from $ 220 to $ 10 per day.
What Are The Factors Of Flash Loan Attacks?
There are many cases of flash loan attacks on the internet resulting in a drop in the value of native coins of many popular crypto platforms. What are now the factors that contribute to such attacks:
- Flash loan attacks involve low risk of penalties and sanctions.
- Flash loan attacks can easily be executed through any platform.
- Fewer resources are required for the execution of such attacks.
- No strict security and protection of these online platforms.
How To Prevent Flash Loan Attacks?
Flash loan attacks cannot be limited, but surely they can be minimized if we follow some simple rules and investment strategies keeping an eye out for all the gadgets that have been detected in the functioning of the system, such as:
- Using a decentralized Oracle network like Chainlink to get price data.
- Flash loans should be processed using two blocks, which helps prevent attackers from approaching directly.
- One can use some flash loan detection software like Flash Loan Advocates etc.