Trending now

Blue Box Packaging Rakes in Reviews for…

Introducing Luka Krämer: The Go-To Generation Z…

Weinshop Weinladen Basel SPANIENWEINonline.ch

XPCover Technologies: Fastest Growing API Marketplace For…

ItsAlexHype, internet money

Mr.92 Sea Moss launches its new all…

HealthGodz just dropped its new line of…

Highpadzone launches its new Apparel, Home Goods…

Rob Potna’s Brother Fatally Shot In Camden,…

Pixe Offers Android Users around the Globe…

Mrjung.net

  • Home
  • Ethereum
    • Ethereum

      The Anatomy of Anonymity: How Dandelion Could Make…

      September 13, 2018

      Ethereum

      A Newly Launched Stablecoin You’ve Never Heard of…

      September 13, 2018

      Ethereum

      Bitstamp: An Overview of the Industry’s Oldest Active…

      September 13, 2018

      Ethereum

      Bitcoin Price Analysis: Strong Rally Tests Trend-Changing Behavior

      September 13, 2018

      Ethereum

      Bitcoin as a Privacycoin: This Tech is Making…

      September 13, 2018

  • Bitcoin
    • Bitcoin

      Abra CEO Believes Bitcoin ETF Eminent, SEC Just…

      September 13, 2018

      Bitcoin

      Mt. Gox Opens Rehabilitation Filing System to Corporate…

      September 13, 2018

      Bitcoin

      World Economic Forum and the Chinese Cryptocurrency Space

      September 13, 2018

      Bitcoin

      Federal Judge Applies Long Established Securities Law to…

      September 13, 2018

      Bitcoin

      Biking Across America, Crypto Cyclists Look to Raise…

      September 13, 2018

  • Markets
    • Markets

      OKEx Founder Released After Questioning in Connection With…

      September 13, 2018

      Markets

      Two-for-One: SEC Slaps Crypto Hedge Fund, Broker With…

      September 13, 2018

      Markets

      Ripple and R3 Reach Settlement in Year-Long Court…

      September 13, 2018

      Markets

      DevCon 4 Will Set the Stage for Ethereum’s…

      September 13, 2018

      Markets

      Stellar-Based Lightyear Acquires Chain, Forms New Entity

      September 13, 2018

  • Guides
    • Guides

      Bitcoin Magazine’s Week in Review: Lightning, Launches and…

      September 13, 2018

      Guides

      Equity Trust Builds New Frontier of Crypto-Based Retirement…

      September 13, 2018

      Guides

      Crypto, Blockchain Companies Shine in LinkedIn’s Top 50…

      September 13, 2018

      Guides

      Distributed Dialogues: Governance and Decentralized Platforms

      September 13, 2018

      Guides

      Battle of the Privacycoins: Why Dash Is Not…

      September 13, 2018

  • Analytic
    • Analytic

      Bitcoin crash: This man lost his savings when…

      September 13, 2018

      Analytic

      Bitcoin crash: This man lost his savings when…

      September 13, 2018

      Analytic

      Lightning Ramp and Casa Join Hands to Develop…

      September 13, 2018

      Analytic

      You Can Now Pay With Bitcoin Via Lightning…

      September 13, 2018

      Analytic

      Abra Supports SEPA Bank Transfers, Enabling Crypto Purchases…

      September 13, 2018

  • Exchange
    • Exchange

      IBM Introduces ‘World Wire’ Payment System on Stellar…

      September 13, 2018

      Exchange

      Lightning Is Made at the #LightningHackday Series in…

      September 13, 2018

      Exchange

      Pellentesque mattis ex eget malesuada consequat. Sed blandit…

      September 13, 2018

      Exchange

      Goldman Sachs Puts Plans for a Crypto Trading…

      September 13, 2018

      Exchange

      Pellentesque mattis ex eget malesuada consequat. Sed blandit…

      September 13, 2018

Mrjung.net
News

Flash Loans: Opportunities and Risks

by Binary News NetworkFebruary 2, 2021023

Vancouver, Canada, 2nd February 2021, ZEXPRWIRE, Flash loans have recently gained a lot of traction for the new opportunities they open to investors but more so, for enabling malicious attackers to exploit the vulnerabilities in various decentralized finance (DeFi) protocols. Since these loans require no collateral, they allow investors to take advantage of arbitrage opportunities but also remove any financial deterrent for plotting a malicious attack.

Flash loans were initially introduced by the Marble protocol in 2018 but were popularized by Aave and dYdX at the beginning of 2020. These services provide a smart contract pool from which users can anonymously borrow money without any collateral. The contracts are based on the Ethereum blockchain and require borrowers to repay the loan in the same transaction. If the loan is not repaid, the transaction would be reversed and the lenders would get their money back. 

This effectively eliminates the fundamental risks that arise out of traditional lending arrangements in the form of default risk and illiquidity risk. Since there is no risk or lost opportunity cost to the lender, the borrower is only required to pay marginal compensation. Apart from this, the borrower also has to pay the gas, which is the fee a user must pay to transact on the Ethereum blockchain.

The growing popularity of flash loans has been on the rise during 2020. The growth of the cumulative volume of flash loans lent on Aave, one of the main platform giving access to this kind of product, has been significative from October 2020 to January 2021. Just in these three months, the cumulative volume increased from $574.02 million on 4th October to $1.58 billion on 4th January. The most lent cryptocurrencies on Aave were DAI and USDC, with 63% of the total volume lent as on 4th January belonging to DAI and 23% belonging to USDC.

Since its emergence, flash loans have mainly been used for arbitrage, wherein, a user identifies a discrepancy in the quoted price of a cryptocurrency on two different exchanges and takes advantage of this by getting a flash loan and transacting in both exchanges to achieve the desired arbitrage. He then closes the transaction by returning the borrowed amount along with any interest and gas. Flash loans are also popularly used for collateral swaps and self-liquidation.

Apart from these use cases, flash loans have also been notoriously used for wash trading and other forms of market manipulation. The most common exploit used by attackers relies on manipulating centralized price oracles which is a single reference point transmitting pricing data to a DeFi protocol. Such protocols are relatively more vulnerable to manipulation than projects that rely on multiple nodes to transfer pricing data (decentralized price oracles). 

Here an example of an attack conducted through flash loan mechanism. The attacker takes a flash loan in ETH and swaps it with sUSD on a decentralized exchange (DEX). This depresses ETH’s value and increases sUSD’s value on the DEX. Then, the attacker deposits sUSD as collateral and takes a loan in ETH in a DeFi protocol that uses the above DEX as its centralized price oracle. He then returns the flash loan and keeps the remaining ETH. The attacker thereby borrowed more than he could’ve borrowed with lesser collateral by manipulating the prices of the two currencies.

In theory, such attacks can be carried out even without the use of flash loans as they target vulnerabilities that already exist in the DeFi system. But such an attack requires a large capital and runs the risk of tainting the attacker’s cryptocurrency. A flash loan solves both these problems and allows anyone to exploit such vulnerabilities.

In essence, flash loans are a wonderful innovation in the world of DeFi which gives users the ability to take advantage of profitable opportunities which were earlier closed to them due to lack of liquidity. On the other hand, it also opens the door to a scary reality where potentially anyone can mobilize millions of dollars worth of cryptocurrency to manipulate the market and walk away with a hefty gain.

Need visibility on your ERC20 transactions? Check out Blockchain Intelligence Group’s insights here: Blockchaingroup

Media Contact:

Storm Partners

[email protected]

The post Flash Loans: Opportunities and Risks appeared first on Zex PR Wire.

Information contained on this page is provided by an independent third-party content provider. Binary News Network and this Site make no warranties or representations in connection therewith. If you are affiliated with this page and would like it removed please contact [email protected]

Share0
previous post
Rapper Lovoy is Juicin’ it for National Fresh Squeezed Juice Day
next post
Nick Gibbs Dedicates His New EP To His Son
Binary News Network

Related posts

Toddlers & Tiaras Universal Royalty® Beauty Pageant Strikes Again

wikiadminOctober 21, 2020

HealthGodz just dropped its new line of Men & Women’s fitness apparel & home equipment

Binary News NetworkFebruary 25, 2021

Higher professional web developer to create an exclusive website

wikiadminDecember 9, 2020

Recent Posts

  • Blue Box Packaging Rakes in Reviews for their Innovative Cosmetic Packaging Solution
  • Introducing Luka Krämer: The Go-To Generation Z Marketing Expert
  • Weinshop Weinladen Basel SPANIENWEINonline.ch
  • XPCover Technologies: Fastest Growing API Marketplace For Insurance Industry
  • ItsAlexHype, internet money

Categories

  • Analytic
  • Bitcoin
  • Dashcoin
  • Ethereum
  • Exchange
  • Guides
  • Litecoin
  • Markets
  • News
  • Uncategorized
  • 건강
  • 과학 기술
  • 뉴스
  • 블록 체인
  • 사업

Categories

  • Analytic (5)
  • Bitcoin (6)
  • Dashcoin (4)
  • Ethereum (5)
  • Exchange (8)
  • Guides (6)
  • Litecoin (4)
  • Markets (10)
  • News (357)
  • Uncategorized (1)
  • 건강 (2)
  • 과학 기술 (2)
  • 뉴스 (8)
  • 블록 체인 (2)
  • 사업 (2)

Popular posts

FUEGO FINO CEO SUPPORTS LOCAL SMALL BUSINESSES RUN...

wikiadminSeptember 16, 2020
September 16, 2020

Trustworthy and Affordable Neptune Towing Service in Tulsa,...

wikiadminSeptember 30, 2020
September 30, 2020

Federal Judge Applies Long Established Securities Law to...

wikiadminSeptember 13, 2018
September 13, 2018

FOUNDER OF IP MOMENT DR. PARESHKUMAR C. DAVE...

wikiadminOctober 6, 2020
October 6, 2020

The Pizza Room Series on Healthy Eating

Binary News NetworkFebruary 4, 2021
February 4, 2021

‘Stay Xmas with Me’ Sure to Pull a...

wikiadminDecember 20, 2020
December 20, 2020

Facebook page

Facebook
@2021 - mrjung.net. All Right Reserved.
Mrjung.net
FacebookTwitterInstagramGoogleYoutube
  • Home
  • Ethereum
  • Bitcoin
  • Markets
  • Guides
  • Analytic
  • Exchange