BurgerSwap Loses $7.2 million in Flash Loan Attack

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Last Updated on 28 May 2021 by CryptoTips.eu

BurgerSwap, a decentralized protocol designed to work with Binance Smart Chain (BSC) was exploited a couple of hours ago. The Flash Loan attack costed the Decentralized Exchange over $7 million in funds. The protocol allows users to swap BSC-based tokens and get rewarded for providing liquidity for the trades.

According to information provided by BurgerSwap, the attackers stole the funds in a total of 14 transactions after they created a fake coin that resembled a BEP-20 coin and paired it with Burger, the native token for the protocol. They then swapped the fake coins with BURGER tokens several times to steal the total of $7.2 million.

Burger Swap token is currently down 15% and is trading around $7.

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What is a Flash Loan attack?

Flash Loan Attacks are a form of cyber attack that is peculiar to the DeFi ecosystem. The attacker takes a loan without a collateral (which is allowed), but then employs other shady tactics to manipulate the market in their favour. This is the most common of the DeFi attacks, mainly because it is cheap and the attacker can easily get away with it.

This is becoming a serious concern in the space as it has plagued users since the DeFi boom in 2020. The Burgerswap attack is not the first time such an attack has been carried out on a BSC project. Just a few days ago, another of BSC’s projects, Bogged Finance, lost $3 million in a similar attack, raising concerns among users of projects with BSC origin.

BSC facing challenges in DeFi

The spate of attacks on BSC’s DeFi projects calls for concern. This is because the platform serves as a viable alternative to Ethereum without the huge gas fees that users have to pay on Ethereum. The gas fees may have been the major driver of BSC growth lately with its number of active daily addresses exceeding that of Ethereum.

If this continues, it may have a significant impact on the growth of BSC as a DeFi platform, thus keeping Ethereum ahead. This is the third of such attacks in May 2021 alone, but it is one of the problems that come with decentralized protocols even though they have been applauded and are becoming very popular among investors.

Image by Niek Verlaan