Guy Makes $45,000 with Ethereum Flashloan – Trustnodes

Guy Makes $45,000 with Ethereum Flashloan

0

Flashloan arbitrage, August 2020

A $100,000 purchase of ethereum was turned into $145,000 and all with zero capital on the part of the one who did it.

The coder instead just utilized available liquidity provided by complete strangers, and through addressing market inefficiencies, made what is for many more than two years worth of salary.

Free money flashloan, August 2020
Free money flashloan, August 2020

It’s not clear what’s going on here with these self-destructs, with it appearing to be some sort of fallback loop by probably a bot that is perhaps destroying some part of its set-up perhaps because it failed.

Self-destruct code? Aug, 2020.
Self-destruct code? Aug, 2020.

There’s now a Flashloans Box that apparently gives you all you need to start coding these things, but the rest of what’s happening there is somewhat simple.

This guy asked the ethereum network to order dYdX to temporarily account to him from its assets under management some 95,000 centralized tokenized dollars in USDc, with the person himself adding about 5,000 which maybe he had laying around.

Then he converts it to eth on Uniswap, and that exact same amount of eth is converted into decentralized tokenized dollars in sUSD.

It so happened that the price of eth in sUSD at Uniswap was a lot more than in USDc on the same dapp. Therefore as one sUSD is one USDc, he just did some simple but very profitable arbitraging.

That’s just 17 seconds after someone bought 150,000 sUSD worth of eth in Uniswap:

Huge premium eth, Aug 2020
Huge premium eth, Aug 2020

This seems to be a simple transaction. The guy had $150,000 and thought to pay a huge premium for what eventually ended up being wrapped or tokenized eth, WETH.

Why? Well considering these are two different addresses, there’s no reasonable ground to think it is the same person or at the very least, even if it is the same person he is doing this for a very good reason rather than to just burn money.

The simplest hypothesis here is that he got called. With this being decentralized finance (defi), that means something different than what we’re used to.

To understand it, think of sUSD as basically DAI. In dai, you put in eth, you get dai dollars, if price moves against you, the dapps sells the equivalent of eth that is sufficient to cover the dai you borrowed.

In sUSD, the dai is FTSE, or gold, or the defi index. And instead of eth -although they’re trialing eth collaterals as well – the primary collateral is SNX, the dapp’s own token.

So things here get complex because we have two volatile assets, say FTSE and SNX, and the conduit of the theoretically stable sUSD that acts as the juggler of these two volatile assets.

FTSE therefore is sUSD, with it moving up and down depending on what British stocks do, but in sUSD.

Therefore if most bet FTSE is going to rise, and it does rise, then SNX-ers who have bet by putting collateral – which again is sUSD as that’s what they get for it – lose because now they need more snx to pay for the sUSD they owe to FTSE-ers.

In short, you can get called, and as Synthetix has announced a second trial of eth collateralization, it may well be this guy got liquidated or due to liquidation related reasons had to quickly buy this eth with it potentially even a bot.

To further understand, Uniswap itself is a block seller, you get x eth for x price instead of bidding. So a big purchase can lead to a significant premium if there isn’t sufficient liquidity in the trading pool of in this case eth/susd.

So this synther probably previously used the eth he had to buy at a premium in this transaction, maybe as collateral in synthetix, and hopefully he made a profit but either way he has to pay it back, and so he bought it with sUSD.

That created an arbitrage opportunity and in the very next block that opportunity is extinguished through a flashloan which in one execution basically told the network give briefly ownership of x amount because it will make us money as proven by the code that was published.

The network obviously knows whether what that code said leads to profit and a return of the full borrowed funds at the end of the execution of that code with it all either checking out or not checking out.

In this case it did check out, and so either this guy lost nothing when he should have lost a lot, but because he utilized this arbitraging opportunity that cancelled it all out.

Or it’s a different bot in which case would be very astonishing as it would have insta learned of the arb opportunity and that can be the case because Uniswap is the most liquid dapp, so you could have a bot system that watches for liquidation opportunities and any arbitrage that may come from it due to these being recurring events.