flash-loan-attacks

Flash Loan Attacks

What Makes Flash Loans Dangerous

Flash loans allow borrowing unlimited capital with zero collateral, provided it's returned within the same transaction. This means any attack that's profitable with enough capital becomes free to execute.

Attack Pattern: Governance Manipulation

Borrow tokens → acquire voting power → pass malicious proposal → profit.

1. Flash borrow 10M governance tokens from Aave/dYdX
2. Delegate voting power to attacker
3. Create + vote on malicious proposal (if single-block voting)
4. Proposal executes: drain treasury / change parameters
5. Return flash loan

Defense: Snapshot-Based Voting

contract SafeGovernor {
    // Voting power is snapshotted at proposal creation block
    // Flash-borrowed tokens have no voting power for existing proposals
    function propose(...) external returns (uint256 proposalId) {
        uint256 snapshot = block.number; // or block.number - 1
        proposals[proposalId].snapshotBlock = snapshot;
        // ...
    }

    function castVote(uint256 proposalId, uint8 support) external {
        uint256 snapshot = proposals[proposalId].snapshotBlock;
        // Uses historical balance, not current
        uint256 weight = token.getPastVotes(msg.sender, snapshot);
        // ...
    }
}

Additional defenses:

• Voting delay: require N blocks between proposal creation and voting start
• Time-weighted voting: voting power based on average balance over time
• Proposal threshold: minimum token holding period to create proposals

Attack Pattern: Oracle Manipulation

Borrow tokens → manipulate spot price → exploit protocol using stale/spot price.

1. Flash borrow large amount of token A
2. Swap token A → token B on a DEX, crashing A's spot price
3. Protocol reads spot price (or manipulable TWAP)
4. Borrow against token B using deflated A price as collateral
5. Swap back, restoring price
6. Return flash loan, keep profit

Defense: TWAP Oracles