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DeFi Protocol Token NFD Crashes By 99 Percent Following a Flash Loan Attack

08-Sep-2022 By: Shikha Jha
DeFi Protocol Token

New Free DAO, a decentralized finance (DeFi) protocol, 

Was targeted by a series of flash loan attacks on September 8, resulting in a reported loss of $1.25 million. Following the attack, the price of the native token dropped by 99%.

Unlike traditional loans, some DeFi protocols provide flash loans, which allow users to borrow huge sums of money with no prior collateral deposits. The sole requirement is that the loan be returned in a single transaction within a specified time frame. 

However, malicious adversaries frequently use this functionality to collect large amounts of assets in order to execute costly exploitations targeting DeFi protocols.

Certik, a blockchain security firm, alerted the crypto community on Thursday of the NFD token's 99% price slippage as a result of a flash loan attack. The attacker apparently used an untested contract and executed the function "addMember()" to add themselves as a member. The attacker then used the unconfirmed contract to carry out three flash loan attacks.

The attacker initially borrowed 250 WBNB valued at $69,825 using a flash loan and then exchanged them all for the native token NFD. The contract was then used to create several attack contracts in order to continuously claim airdrop rewards. The attacker then exchanged all of the airdrop rewards for WBNB, resulting in 4481 BNB.

The attacker returned the borrowed amount (250 BNB) and traded 2,000 BNB for 550,000 BSC-USD out of the 4481 BNB. Later, the attacker transferred 400 BNB to the well-known coin mixer service Tornado Cash.

Certik further stated that the hacker responsible for the NFD flash loan attack was connected to those who hacked Neorder (N3DR) in May of this year. Later, Beosin, another blockchain security firm, discovered that the culprits behind both attacks may be the same.

Beosin also highlighted another vulnerability in the NFD protocol that might be used for another form of flash loan attack. According to the security firm, the price might be changed because it is computed using the amount of USDT in the pair, which could lead to a flash loan attack if exploited.

Due to the low risk, low cost, and high-profit elements, flash loan attacks have grown in popularity among hackers. On September 7, Nereus Finance, an Avalanche-based lending protocol, was the victim of a crafty flash loan attack, leading to a loss of $371,000 in USDC. Earlier in June, Inverse Finance suffered a $1.2 million loss in another flash loan attack.

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