Flash Loan Governance Hijacking

Flash loan governance hijacking is a specific type of attack where a malicious actor uses a flash loan to borrow a massive amount of governance tokens to gain a temporary majority in a voting process. This allows them to pass a proposal that benefits them, such as transferring treasury funds or changing protocol parameters, before repaying the loan within the same transaction.

This attack is possible because many protocols do not account for the temporary nature of the voting power. It exposes a fundamental flaw in using token-weighted voting for protocols with high-value treasuries.

Preventing this requires implementing mechanisms that ensure voting power is based on long-term token holding, such as snapshot voting or time-weighted governance tokens. It is a major security challenge that has forced many protocols to rethink their governance architecture.

This attack highlights the danger of simplistic decentralization models.