Flash Loans and the attacks that happen around it.
From a layman’s perspective, a flash loan is a typical loan that is taken by a borrower without submitting any kind of collateral. The lender allows the borrower to settle the loan instantly in a single transaction. Since, the transaction is completed instantly and doesn’t require any kind of collateral, there are users that manipulate the transactions unethically and make profits out of such transactions. Such instances where the borrower makes unethical profits out of flash loan are labelled as Flash Loan Attacks.
Flash loan attacks generally take place within a span of 5 to 15 seconds and give the manipulator an unprecedented number of profits. The incidents of flash loan attacks in the market are increasing and are affecting the prices of the digital assets.
Recently, Beanstalk, an Ethereum project was made the victim of a flash loan attack, where the user made the attack, resulting in a loss of over $180 million, which happened to be recorded as the largest flash loan attack in the crypto domain.
Nirvana’s stablecoin and native token – a victim of Flash loan!
According to the reports, it was recorded that, Nirvana’s native token and stable coin lost around $3.5 million subjected to flash loan. Due to the attack both the digital assets saw their value plummet and drop significantly. The native token ANA and the stable coin NIRV slipped by at least 90%.
The user first went on to borrow $10 Million USDC stable coin to get $10 million ANA coins. Then the user swapped what was actually $10 million in ANA to $13.49 Million in USDT. The Nirvana Treasury lost $3.49 million as a result of this move.
There was no official statement recorded by Nirvana, but Solend went on to release a statement that it is aware about the incident and is investigating with the Nirvana team to catch the criminal.
According to me, the cyber-crime rates and the instances of robbing the investors of their cryptocurrencies are already touching sky high in the market. The occurrence of Flash Loan Attacks is another such crime, which shows that the regulatory framework structured out to regulate the market is not stringent enough. Moving forward, if the market has to reduce the incidents of these crimes, then a proper stringent statutory frame work needs to be crafted out and technology deployed should be more advanced than the ones these criminal’s use.
What do you think about the regulatory frame work that’s present in the crypto domain? Share your views in the comments below.