jake-wolf | Flipside Analyst

    jake-wolf

    Joined Jun 25, 2021
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    Flashloan Prevalence on AAVE

    Flashloan Prevalence on AAVE

    Sep 1, 2021 - I started the analysis by figuring out which coins were used most, in terms of US dollars. They came out to be WETH, DAI, USDC, USDT, WBTC in that order. Flashloans are commonly used for arbitrage, which is buying and selling the same asset at the different prices the market makers put it at. They offer an unlimited amount of funds, which means that you can make as much money off arbitrage at one point, unlike the centralized system of currency. The rate is significantly cheaper because the amount borrowed is paid back with the additional amount in the same transaction, if the transaction does not go through, than you never borrowed the money. The second graph shows how often flashloans were used and for how much. The month of May had flashloan amounts sky rocket. They have not been the same since and have actually been decreasing. In May there was one major attack that occurred using flashloans. To being the person responsible borrowed $270 million of Eth, which they used to manipulate kyber network oracle. The function of KNO is to connect the block chain to the real world. Through the process they were able to mint many xSNXa tokens, which were sold for ETH and SNX. They than found a weakness in the xBNTa contracts because as a wrapped token, it could only be minted using the BNT currency. The smart contract failed to check this, therefore they could use different tokens to mint xBNTa tokens, which they than sold, making a killing. On May 20th another one flashloan attack was launched. Although there were definitely many alternative purposes for these flashloans, these specific ones were used during attacks. One use of a flashloan is swapping debt and collateral at the same time. If you borrow coin1, and use coin2 as collateral, but coin2 crashes, than you could lose your loan. A flashloan would allow you to trade coin2, for a more stable coin.

    jake-wolf