Flash Loan Governance Attack

A flash loan governance attack occurs when an adversary utilizes uncollateralized, instant liquidity to amass a massive amount of voting power within a single block. By borrowing a large quantity of a protocol's governance token, the attacker can temporarily control the voting outcome to pass malicious proposals.

These proposals often involve draining protocol reserves, changing collateralization ratios, or minting unauthorized tokens. Once the vote is cast and the malicious action is executed, the attacker repays the flash loan within the same transaction, leaving the protocol compromised.

This exploit highlights the danger of using spot market liquidity as a proxy for long-term governance commitment. Protocols mitigate this by implementing snapshot-based voting or requiring tokens to be staked for a duration prior to a vote.