Flash Loan Attack Patterns

A flash loan attack pattern is a malicious exploit occurring within a single blockchain transaction where an attacker borrows a massive amount of uncollateralized capital to manipulate asset prices or exploit vulnerabilities in decentralized finance protocols. Because the loan must be repaid within the same transaction block, the attacker uses the borrowed funds to perform a series of actions, such as massive trades on decentralized exchanges, to induce slippage or trigger liquidations.

Once the target protocol's state is manipulated to the attacker's advantage, they execute a profitable exit and repay the original loan. If the final state does not yield a profit, the transaction fails and reverts, leaving the attacker with no net loss beyond gas fees.

These attacks rely on the atomic nature of blockchain transactions, where multiple operations are bundled into one execution. This mechanism bypasses traditional collateral requirements, enabling low-capital actors to exert massive market influence.

Protocol developers must implement time-weighted average price oracles and multi-step verification to mitigate these risks.