Binance smart chain - two flash loan attack in a month
On May 20, Pancake bunny finance tweeted about the flash loan attack and details of the damage later along with how the transactions made. Now, Burgerswap experienced the same and tweeted about it. Flash loan attacks are not technical hacking, it involves people who abuse it and it does cause some severe damage to people.
Non- Collateral loans:
In order to know about flash loans, one must need to know about Non- collateral loans. In conventional banking, non-collateral loans are usually available for small value, where borrowers don't need to provide any collateral or assets to the loan provider in order to take the loan and the borrower has to pay the loan back in time with the interest and principal amount. The value is set to be limited for borrowing because there is a high chance for the borrower to get away with the money.
What is a flash loan?
Flash loans are similar to non-collateral loans except with the repaying part. As the name says the loans happen in a flash as like the comic character. Here, in a DeFi platform, these flash loans are borrowed and repaid in a single transaction in order to avoid the scenario of the borrower running away with money in the digital world. Well if bought and repaid in an instant how will the borrower and lender get the benefit. Arbitrage, buying a coin at a low price in one exchange and selling it in another exchange for a higher price, by taking the advantage of the market volatility in the two exchanges at that time in the market. And Arbitrage opportunities don't come easier, you need a perfect scenario in order to gain profit, if not you won't have much profit.
As the transaction looks complex, one needs to write code or use third-party API tools. The profit gain from arbitrage-based flash loans depends on the market volatility of the crypto you gonna use for flash loans. Since there is no limit for the number of loans that can be bought through flash loans, one can make a huge profit by borrowing a humongous amount of money that a DeFi platform could handle. Depending on how you are making transactions there will be gas fee charges for making the transactions.
What is a flash loan attack?
Well, you see how one can make money without investing any in a single transaction. Imagine a person buys huge amounts of crypto and gains huge profits using the market's current volataility. And by attack means repeating the same process, again and again until the market volatility changes. But usually, the DeFi protocols are made secure in a way to prevent attacks like these when was it happened the first time and now these reported attacks happen at the exchange that has come new to the market.
The Pancake Bunny attack:
On May 20, pancake finance, a DeFi platform on BINANCE smart chain, posted a tweet about a flash loan attack and later released full details of the attack and assured the people about compensation for loss who invested there. Somehow the exploiter has created damage worth over 200M $ in the exchange.
The Burgerswap attack:
Now, A similar kind of attack happened at Burgerswap which also a Binance smart chain-based DeFi platform. The tweet says $7.2M worth of tokens were stolen from their exchange. And it's really sad to see this kind of attack repeated in the same chain within a month.
However, this is not the first time we are seeing this attack. Earlier it happened in the Ethereum network too. Since then several exchanges take action and to stop attacks like these. Yet, some people find a way to get around it. People are really working hard to make use of DeFi platforms by innovation several projects, but there are exploiters always waiting for an exploit to be noticed and make use of it. This is very sad for the people in the Crypto community. We hope in coming days, we could see some measures to avoid any kind of exploits.
