Flashloans, The Crazy New Invention of Magic Internet Money
February 15, 2020 7:11 pm
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The ethereum based trading platform bZx is to diversify its price sources through Chainlink, an ostensibly decentralized oracle feed.
“We have been chatting with the team yesterday. Tom and Kyle (founders) met Sergey several times before. We will integrate ChainLink,” a representative from bZx said.
This comes after a very skilled coder was able to make $360,000 worth of eth through the old trick of half long and half short while using flashloans.
In one transaction the haxor shorted the tokenized bitcoin WBTC on bZx and then sold WBTC on Uniswap.
The bZx defi dapp has stated they do not use Uniswap as a price determinant for their shorts and longs, they use Kyber.
Kyber however uses Uniswap reserves, so a change at Uniswap translates to a change at Kyber and thus to a change at bZx, in this case with the price going down and so making the short profitable.
An easy solution to that is using numerous price feeds, with WBTC trading on numerous exchanges including Bitfinex.
Hence where Chainlink comes in as they allow for the integration of numerous price feeds for smart contracts.
Even with such numerous price feeds you could potentially still manipulate the market, but it would be far harder and close to impossible in the way it was done here because Bitfinex is not a smart contract, so the flashloans don’t apply there.
If it is just one price feed, however, it is child’s play to manipulate it even with a very liquid market, let alone here with barely any liquidity.
In traditional markets they go even further with a one hour window setting the price in addition to obviously using numerous price feeds from different exchanges, but defi is still a very new space where a very expensive lesson has been learned.
Copyrights Trustnodes.com
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