Recently a potential exploit in the Decentralized Finance (DeFi) financial system was revealed and it will not be fixed until Friday noon.

This revelation comes a few days after two DeFi tools were used to steal a million dollars, which we previously addressed on the Bitcoin Arab website.

Dominic Harz, a doctoral candidate at Imperial College London, has published a letter outlining the potential weaknesses in the concept of quick loans and DAI digital currencies.

He also notified the Project Maker team – which runs Dai – but the issue will not be taken up until it goes through today’s vote.

This means, at the same time, that $700 million worth is at risk.

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Harz stated:

This attacker would be able to steal $700 million worth of Ethereum collateral and be able to print Dai coins at will.

This attack will spread across the entire DeFi space as DAI is used as an additional support in other protocols.

What is a flash loan?

Flash loan is a risky new concept in DeFi.

It is basically a process of lending money, without asking for anything to be held as collateral in case the loan defaults.

The only reason this type of loan is created is that the loan is repaid in the same transaction.

This is possible because Ethereum transactions can be of multiple components.

Can an attacker use Quick Loans to attack Tweet embed? Discover!

We determine the amount of MKR required and show that the attacker can increase his chances by:
– Combine loans from Tweet embed And the Tweet embed to increase liquidity
– manipulate oracle in DEXs

– Dominic Harz (@dominik0_) February 20, 2020

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So, in the event that DeFi is badly exploited, as we have indicated in previous topics, one large transaction can lead to a set of actions across different DeFi protocols.

Previously, a malicious deal was exploited by offering a quick loan, and they used the money to achieve bad goals, and stole $ 350 million, after returning the original loan because if they did not, due to the power of the blockchain and if the money is not returned, the same transaction (of the same type) will be debited. ).

According to Dominic Harz, flash loans can be used to exploit Maker.

MakerDAO is a decentralized governance system that manages the DAI stablecoin.

Referees use MKR tokens to vote on how Dai should run, but the system can be exploited.

Hartz stated:

The basic idea is to accumulate enough MKR tokens to replace the existing governance nodes with those of bad attackers.

Then, the malicious governance contract can give the attacker full control of the system and withdraw any collateral in the system as well as create arbitrary amounts of new Dai.

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However, when this attack idea was proposed before, the idea was to crowdfund the MKR tokens needed to implement it.

This is where flash loans or flash loans come in.

They make it easy for an attacker to generate a large amount of MKR tokens and use them to take over the system.

Not only can they use a quick loan to buy a large amount of MKR, but they can also use a quick loan to deal with the price of the MKR in the same way as the recent DeFi attacks.

With the cheaper MKR price, it becomes much easier to get more cryptocurrency.

Harz added that this strategy can be used in conjunction with a crowdsourcing strategy to achieve maximum impact at a low cost.

Maker is set to vote on a solution to prevent non-performing loans from affecting the governance mechanism this afternoon.

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