The crypto industry has been wrapped up in the first two major exploits of decentralized finance this week. The decriers are having a field day but the outcome may actually be bullish for Ethereum.
Ethereum Shrugs Off DeFi Exploits
ETH prices have bounced back following the two DeFi exploits this week. From a Monday low of $245 prices have surged 15% to top out above $280 during early trading in Asia today. Market may resume their wider correction but in the short term Ethereum has remained bullish.
The Block CEO Mike Dudas acknowledged the move:
— Mike Dudas (@mdudas) February 18, 2020
The comment drew reaction from respected economist Alex Krüger who added that there was nothing the shrug off as the exploits were bullish for ETH. When questioned on this remark Krüger stated that it was the ultimate use case, elaborating;
“Flash loans provide access to instantaneous liquidity sans collateral, and work on top of deterministic transactions that fully eliminate risk for both borrower and lender. This is extremely valuable, and the very best expression of programmable money.”
He continued to state that it should generate interest in Ethereum from the finance industry and thus increase demand for ETH. But many DeFi platforms could die in the near term because of this.
What The Flash?
In order to understand why this is bullish for ETH we need to delve deeper into flash loans. It should be noted here that nothing was hacked, just a canny trader using arbitrage to exploit weak links in a system.
A flash loan is effectively when someone exploits a smart contract to borrow crypto funds with no collateral,