Hacker Makes $360,000 ETH From a Flash Loan Single Transaction Involving Fulcrum, Compound, DyDx and Uniswap – Trustnodes

Hacker Makes $360,000 ETH From a Flash Loan Single Transaction Involving Fulcrum, Compound, DyDx and Uniswap

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Guy makes $360,000 ETH from a flashloan single transaction

From nothing, $360,000 has gone into the pocket of someone in seven steps.

One, get out a flashloan for 10,000 eth (worth about $3 million) from trading platform DyDx.

Send half to Compound and half to bZx. With the Compound half borrow 112 WBTC. With the bZx half, short 112 WBTC. Now send this Compound 112 WBTC to Uniswap to lower price. Profit from the short and finally pay back that 10,000 eth loan.

Easy right? Except you have to do all of this in a single transaction because that’s how flash loans work:

Flash loan single transaction manipulation, Feb 2020
Flash loan single transaction manipulation, Feb 2020

This entire operation cost the hacker just $8.71 in transaction fees and it was possible only because of this new invention of flash loans.

We’re still trying to wrap our head around what flash loans are, but basically you can borrow an asset without putting down any collateral, so for free, but only if you pay it back in the same transaction.

You basically code a smart contract that tells the ethereum network you’re going to send the borrowed eth to one exchange to buy at a lower price and sell at a higher price on another exchange and since the exchanges are open source and the network knows everything they figure out whether what you say is true or not, and so you can flash borrow.

ETH borrowing rate spikes on flash loan short selling, Feb 2020
ETH borrowing rate spikes on flash loan short selling, Feb 2020

This flashloan thing sounds incredible because it is an actual loan without requiring credit etc, but a loan for a few seconds with the lender certain they’ll be paid back because of the contract conditions as the transaction just doesn’t happen, reverts, if the loans is not paid back.

That this can be done is a bit wow even if in this case it was used for that old trick of half long and half short because with this invention it is truly a meritocracy where even a very poor kid can take advantage of arbitrage opportunities without needing any upfront funds.

Update:

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wolf in sheep clothing
February 16, 2020 3:25 pm

Stop calling the person a hacker, if the code allows for this then its fair game. Write better code.

machv5
April 2, 2020 10:53 am

I completely agree stop calling him a bad hacker in the context of labeling the actor to say he did something wrong. However to label him a hacker because he did something in a way that the original creators did not foresee yet did so within the rules that were set out I don’t agree with your statement because he is one, and more than technically. If anything the person is the textbook definition of one. Anyway, potato ph0bobot. The guy/gal/other (wtf 3 genders now?) who profited from doing this did so legally but the way the press is labeling… Read more »

Zinovsky
February 16, 2020 8:03 pm

Hacker?????? Are you sure??? Someone his IQ is too high used the system legally, took a loan , traded, took profit and return the loan inside one transaction, is this for you a hacker habit!!!! Please back to school

Luiso
February 16, 2020 12:35 pm

“hacker”

itsencrypted
February 29, 2020 5:10 pm

“Now send this Compound 112 WBTC to Uniswap to lower price. “
If there’s not so much liquidity, then yes.. with 112 WBTC you will push the prices low.
But that’s not arbitrage to me, that’s market manipulation.

007
February 16, 2020 4:52 am

IQ 300.AND A CROOK.

machv5
April 2, 2020 10:55 am
Reply to  007

not if the person is a crook just what crime are they guilty of?

vitalik
February 16, 2020 7:33 pm

every single defi loan or margin contract has collateral to back it up and liquidation levels that protect the lending protocol.
p.s. you don’t sound retarded, and it’s opposites day

Jerry
February 17, 2020 2:11 pm

Inside job. You can send me your opinion on my comment all you want. I don’t care.

Eric Angleton
February 17, 2020 12:46 am

Please elaborate on exactly how this was a “Hack.” I’m really trying to look at that objectively, but it truly seems like it’s just trying to insert negative propaganda into this.

DOMINGO
February 19, 2020 10:05 pm

Looks like an arbitrage trade to me.

Martin E Juarez
February 17, 2020 2:31 am

I am a retired teacher of 13 years and I am intrigued in this transaction using the Flashloan method. Can you please explain the process for me once again. This is my email,

Paul
February 17, 2020 8:25 am

Lol