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How to prevent a Flash Loan attack? Tips and warnings

Introduction

Now what can we do to prevent it? Is the first thought which came into a flash of the moment, Flash! Instant, that’s what we have described while analyzing the concept of flash loans, Flash loans an easier way to get approved loans in the world of crypto trading.

It was the system introduced for the users who are in urgent need of a loan that doesn’t take long processing period and involvement of any third parties or need of keeping a collateral, but as it is impossible to have all the active ingredients in one shot. To safely transfer the bitcoins you can visit sites like  https://bitcoins-era.io/

Therefore, you have to compromise with the other factors in order to fulfill your basic need, but that can cost your entire savings and profits!

What are Flash loan attacks?

Flash loan attacks are the serious problems growing like weeds in the field of cryptocurrency, being uncollateralized and unregulated they pave an easier way for the cyber attackers to get targeted and hence they can manipulate the whole crypto markets.

The attacks happen all of a sudden without any prior notification and also no harm to the attacker, they are one of the major DeFi attacks which are still difficult to spot and solve in minutes.

Now, as we know that flash loans are the online loans granted under the system of smart contracts, and also you can refer to our previous article on flash loans, where you can take an overview of this term.

How are Flash loan attacks deployed?

Flash loan attacks are executed through the major loopholes in the borrowing system, like zero capitals, no collateral, and most of the important factor is its instant sanctioning of loans.

Which gives a huge relief to the 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 happened in the past few years:

Real-life-examples of Flash loan attacks

  1. PancakeBunny Flash Loan attack

PancakeBunny is a yield farming aggregator which works on binance smart-chain network, it has also introduced the system of flash loans which were self-automated and unregulated.

Now, an anonymous attacker borrowed 45 million dollars on 19 may, and then he used this amount to exploit other cryptocurrencies.

Crashing the values of Bunny tokens with them, which ultimately leads to value dropping about 96 percent from 220 dollars to 10 dollars in a day.

What are the factors of Flash loan attacks?

There are lots of instances of flash loans attacks present in the internet which results in dropping of many popular crypto platforms’ native coins value, now what are some factors that contributes to such attacks:

  • Flash loans attacks involve low risk of penalties and punishments.
  • Flash loans attacks can easily be executed through any platform.
  • Less resources are required for the execution of such attacks.
  • No tight securities and protections of such online platforms.

How to prevent Flash loan attacks?

Flash loans attacks can’t be restricted but they can surely be minimized if we follow some simple rules and investments strategies by keeping an eye over any gimmicks that have been caught in the functioning of the system like:

  • Using a decentralized oracle network like Chainlink for obtaining pricing data.
  • Flash loans must be transacted using two blocks therefore it can be prevented from direct approach of the attackers.
  • One can use some flash loan detection software like Flash loan defenders, etc.
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