A series of flash loan attacks is currently shaking the Binance Smart Chain. In total, DeFi projects are said to have lost nearly a billion US dollars.
The Binance Smart Chain (BSC) is facing a wave of flash loan attacks. The DeFi platform recently announced this via Twitter With. Accordingly, a total of eight attacks on the BSC were recorded in the past few days. The attackers are “well-organized hackers”. According to media reports, the damage is said to amount to around one billion US dollars. DeFi projects should review and strengthen their security measures. The Binance Smart Chain Community is now having a tough time, it continues.
The affected dApps include PancakeBunny, which recently lost almost $ 200 million. The attack pushed the BUNNY rate from 150 to 11 US dollars within minutes. The latest victim, Belt Finance, was hit with just under $ 50 million.
The following is split on Twitter. Some believe that Flash Loan attacks were only used as a camouflage so that projects can run away with the money collected and wondered what Binance would like to do specifically against these problems. In addition, users complain about the quality of customer support. However, other users defended the BSC and referred to similar events at Ethereum or Polygon.
How do flash loan attacks work?
Flash loan attacks do not only occur on the Binance Smart Chain. Rather, they are a birth of the DeFi ecosystem. The term “flash loan” describes a type of unsecured loan transaction in which the amount borrowed is repaid in the same transaction. So basically a zero-sum game.
The purpose behind this is to look for arbitrage opportunities, i.e. to take advantage of price differences between two exchanges. For example, you can use a smart contract to borrow ETH from an exchange and use it to buy any token. These tokens are sold again for Ethereum on another exchange. The borrower then pays back the borrowed amount with interest and reaps the profit. If the borrowed amount is not returned in time, the transaction will be interrupted and the lender will get his money back.
For creditors, the risk with flash loans is relatively low, after all, they get the loaned amount back in the same transaction. However, the ability to borrow a lot of money to trade on an illiquid exchange offers attackers many attack vectors. The attacks on the Binance Smart Chain mentioned are just one example.