Professor Yang Wang: The Good, the Bad, and the Ugly: DeFi, Pump-and-Dump, and Flash Loan Attacks

Abstract: Blockchain is a revolutionary technology. With key properties such as decentralization and immutability, blockchain is transforming many industries. One fast-growing area of blockchain innovations is decentralized finance (DeFi). DeFi presents exciting opportunities to make it possible to allow over 1 billion people to have access to financial services (e.g., saving, lending, and investing) that they couldn't previously. The total value locked (TVL) in DeFi projects has skyrocketed from $1B USD in March 2020 to $13B USD in Nov. 2020. However, these decentralized markets are also subject to (malicious) market manipulations, e.g., pump and dump.

In this talk, I will focus on how flash loan, a novel financial mechanism in the DeFi space, was exploited by malicious actors to achieve huge monetary gains at the cost of other participants in the ecosystem. I will present real-world cases, e.g., how Harvest Finance lost $24M USD due to a flash loan attack on October 26, 2020. I will discuss some ideas to help mitigate this kind of attacks.

Questions? Contact Emily Knox