Re-Entrancy Vulnerability

Re-entrancy is a critical security flaw where a smart contract calls an external contract before updating its own internal state. A malicious contract can then recursively call back into the original contract before the first execution finishes, potentially draining funds or manipulating balances.

This is particularly dangerous in lending protocols or liquidity pools where withdrawal functions might be exploited to withdraw more tokens than the user is entitled to. To prevent this, developers use re-entrancy guards, which are boolean flags that lock the contract during sensitive operations.

Understanding this vulnerability is essential for anyone building decentralized finance applications. It highlights the importance of the checks-effects-interactions pattern in secure coding.