The attacks, targeting decentralised finance (DeFi) platforms, have already resulted in billions of dollars in losses, according to research co-authored by Professor Tim Hall of the University of Winchester.
The study, published in the Journal of Financial Crime, identified 254 successful attacks on the DeFi ecosystem between February 2020 and July 2024, totalling $6.568 billion in losses.
Report authors Remo Stieger (left) a former partner at SyntiFi Risk Intelligence, and Professor Tim Hall of the University of Winchester’s Department of Policing, Criminology and Forensics. (Image: University of Winchester)
Of these, 72 were flash loan attacks, which accounted for $1.211 billion of the total losses.
Professor Hall said: “This research came about because of a shared concern about new criminal opportunities created by the advance of cryptocurrencies and blockchain technologies.
“We now are seeing crimes that we have never seen before and ones that are capable of stealing mind-boggling sums of money, often in the tens of millions of dollars.
“We saw the research as the perfect opportunity to combine the insights of SyntiFi’s on-chain risk intelligence engine, which is capable of scanning billions of cryptocurrency transactions, with more context criminological analysis.”
Flash loans allow individuals to borrow large amounts of cryptocurrency without collateral, provided the loan is repaid within a single blockchain transaction.
This mechanism can be exploited by attackers to manipulate prices, exploit vulnerabilities in smart contracts or take advantage of discrepancies across exchanges.
Professor Hall emphasised the real-world impact of these crimes.
He said: “As part of our research we spoke to a representative from a platform that had suffered a massive flash loan attack.
“This cost their investors, in some cases, millions of dollars.
“The attacker started taunting the platform on social media after the attack and this led to some victims engaging with the attacker and outlining the devastating impacts that the loss of this money had on them.”
This research is the first to combine criminological and On-chain Risk Intelligence (ORI) analysis and to use multiple sources to explore the nature, extent and patterns of attacks on the DeFi ecosystem.
It used SyntiFi’s ORI engine to analyse 20.63 billion blockchain transactions across seven major blockchains where flash loans are available, including Ethereum, Base and Polygon.
Professor Hall said: “We are keen that this isn’t just seen as a piece of academic research.
“The analysis we did has a host of applications for the cryptocurrency industry, for regulators and for legal and law enforcement agencies.
“We have developed a short briefing paper that summarises the key findings and are actively looking to share the findings across the decentralised finance sphere.”
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