Flash Loan Attacks: How Crypto Exploits Work and How to Avoid Them

When someone borrows millions in crypto without collateral—just for a few seconds—and uses it to crash a market, that’s a flash loan attack, a type of blockchain exploit where attackers borrow large sums of cryptocurrency in a single transaction to manipulate prices or drain liquidity. Also known as flash loan exploits, these attacks don’t need money upfront—they just need a flaw in a smart contract. They’re not science fiction. In 2022, one attacker stole $600 million from a DeFi protocol using this exact method. And it wasn’t the first time. These attacks keep happening because the rules of DeFi are still being written—and some people are good at breaking them.

Flash loan attacks rely on three things: DeFi protocols, decentralized finance platforms that let users lend, borrow, and trade crypto without banks, smart contract vulnerabilities, bugs in code that let attackers trigger unintended behavior, like manipulating token prices, and price oracles, systems that tell smart contracts what the real price of a token is—but can be tricked if the market is manipulated. Attackers take a flash loan, use it to buy up a small token on a DEX, making its price look inflated, then use that fake price to borrow way more than they should from another protocol. Finally, they sell the token back, crash the price, repay the loan, and pocket the rest. It’s like borrowing a car, crashing it into a wall to make it look valuable, then selling the parts before returning the car.

Most of the posts here focus on shady exchanges and risky tokens—many of which are sitting ducks for flash loan attacks. Platforms like Zyberswap v3 and IncrementSwap have low liquidity and no audits, making them easy targets. Even airdrops like Flourishing AI or Burncoin, with tiny trading volumes and no real team, can be manipulated in seconds. If a token’s price can be moved with $50,000, it’s not secure—it’s a target. The same goes for platforms like BEX Mauritius or VAEX that claim to be regulated but show zero trading activity. No volume means no real market. And no real market means no protection against manipulation.

You won’t stop flash loan attacks by avoiding every new token. But you can avoid getting burned by asking one simple question: Does this have real trading volume and independent audits? If the answer is no, it’s not a crypto asset—it’s a gambling chip with a blockchain label. The safest DeFi apps are the ones that are open about their code, have real users trading every day, and have been tested by third-party auditors. The rest? They’re just waiting for someone to exploit them.