Sorry for the vague question, but I was wondering what people familiar with the upcoming Smart Contracts release feel about how robust Cardano will be when faced with exploits like Flash Loans present in Ethereum/Binance Smart Chain.
Is this something that will be possible in Cardano?
Is it the responsibility of the author of the smart contracts to ensure the code is robust against it? Or will there be protection on the side of the protocol?
Thanks in advance and happy to read more if you point me in the right direction. Cheers.
Solidity is not very safe programming language to make smart contracts on. That’s what Etherium smart contracts are mostly based on. Smart contracts written in Solidity are prone to errors that are unpredictable and attacks that are well known. The fact that all this is well known and there is no fix yet means it will probably stay that way.
Cardano smart contracts will be based in Haskell. This language has been used in finacnial industry for a while, as it is proven to be one of the safer ones. So, Plutus (which is based on Haskell) has advantage of less errors and better security.
Does that mean it will be perfect? Nope. Just there will be less issues with error and safety.
I don’t know about Binance.
Also, yes who ever makes a smart contract can make it in a messy way and cause loss to occur.
Want to read more on that, here:https://emurgo.io/en/blog/the-unrivaled-safety-of-cardano-smart-contracts
As for flash crash, most of those have nothing to do with smart contracts. Exchanges are offering up to 100X leverage future trading on cryptos. There are a lot of exchanges running 24/7 and crypto is a new market. There isn’t enough volume to keep prices stable on all exchanges. So, one big trade comes in, wipes out support levels to get filled. Then all the future contracts automanically liquidate to cover the margin, then it drys up the market even more, which activates more margin calls, and on and on…The truth is that besides Bitcoin, there are no cryptos large enough to support trading on multiple exchanges. This is why crypto markets are so volatile.
Lets take example of Corn Futures. At the moment July contract is at $7 per bushel. Each contract has 5,000 bushels, which makes the value of the future $35,000. Yesterday (May 19) volume was just over 100,000. That represents $3.5 billion and open interest was over 600,000 which represents $21 billion. This is just July contract on just one exchange. The whole world corn trade is worth about $30 billion a year, but futures can be leveraged. So, Chicago Board of Trade decided to put maximum price movemet for corn futures to be around 5.5% (in either direction) to prevent price manipulation, stop/loss raids (same as flash crash) and high volatility due to such low trading values. Yep, $3.5 billion and $21 Billion in big boy investment world are considered low, easily manipulated volatile values.
Compare that with Etherium. Total volume traded yesterday was $70 billion on over 300 exchanges. Makes it very easy for one person to flood one exchange, then start buying at lower price and sell at other exchanges that didn’t experience flash crash. The only way this is gonna stop happening is if amount of exchanges drops to 15 to 20, down from 300… or we have multiple cryptos worth over trillion dollars.
