Flash loans have become a revolutionary concept in the decentralized finance (DeFi) space. As explained by @0xQuit in a recent post on X, they are "zero-risk loans" where the entire loan must be paid back within the same transaction, eliminating risk from the lender’s perspective.
Flash loans are zero risk loans where the full loan amount must be paid back in the same transaction is was originated. They are useful for arbs or opportunities for profit where you simply don't have the ETH up front.
— Quit (@0xQuit) October 3, 2024
But this one actually sacrificed a punk...
1/🧵 pic.twitter.com/BrjZ9qyLpa
However, when these flash loans are used creatively—or recklessly, as in the case of KamalaPunk—things can take a chaotic turn.
The Setup: A Flash Loan Psyop
The KamalaPunk scenario began with a flash loan transaction involving 24,000 ETH, a staggering amount by any standard.
Contracts A and B were deployed, where Contract A held Punk #1563 and Contract B borrowed 24,000 EppTH from Balancer. Contract B then bought the punk from Contract A, creating a circular transaction where the ETH was paid back in full within the same atomic process.
Nothing changed except that the punk now rested with Contract B, and no profit was realized—at least, not immediately.
At first glance, it appeared to be another clout-driven stunt, much like previous high-profile punk sales. However, as @0xQuit revealed in his X post, this entire process was an elaborate setup to market a new ERC20 token: Kamala Harris Punk.
The punk was tied to a presale for this token, with 90% of the presale funds destined to seed a Uniswap liquidity pool and 10% set aside for the developer.
The objective? Create hype, raise funds, and flip the punk in an auction with a minimum bid equal to the presale amount.
The Risks: Where KamalaPunk Goes Wrong
While this setup may seem like just another audacious crypto scheme, the risks involved are enormous. According to @0xjustadev in a post on X, the KamalaPunk contract contains a critical vulnerability that could lead to significant financial loss for anyone involved.
kamalapunk is so bad it's making my eyes bleed looking at the code
— 0xjustadev.eth (⛽️,📉) (@0xjustadev) October 3, 2024
🚨 WARNING: DO NOT BUY THIS "MEMECOIN" 🚨@0xQuit wrote a thread about 'what happened' with the 24K ETH sale and how it's supposed to work here: https://t.co/k6XQLoDCJR
But there's a critical vulnerability… pic.twitter.com/op8K3EHJI4
After the auction period, the highest bid matching the contract’s balance wins the punk. However, the vulnerability lies in the kamala() function, which allows the punk to be sold back to the contract at its current balance. This effectively lets someone bid the exact contract balance, call kamala(), retrieve their bid amount, and gain ownership of the punk.
Worse, this process can be repeated for a minimal amount—potentially as low as 1 wei—leading to a situation where the punk is repeatedly acquired for free while draining the contract's funds. This flaw makes the KamalaPunk presale an almost guaranteed disaster for buyers, leaving the door wide open for malicious actors to exploit the system.
The Bigger Picture: Flash Loans and Dangerous Market Practices
KamalaPunk is a cautionary tale about the dangers of combining flash loans, meme coins, and upgradeable contracts.
Flash loans, while innovative, can easily become tools for speculative or outright fraudulent schemes. In this case, the developers are betting that their 10% take will be more valuable than the punk they’re giving up, but the contract's vulnerabilities suggest otherwise. The upgradeable nature of the contract also raises alarms.
As @0xQuit pointed out, even though an upgrade could save the project from disaster, it also opens the door to further manipulation and distrust from the community.
From an outsider's perspective, KamalaPunk is little more than a marketing gimmick disguised as a punk sale. It’s a case of leveraging the punk’s clout to create excitement around a presale, all while leaving buyers exposed to considerable risk.
while it will probably get fixed, the KamalaPunk contract is some of the worst code I have seen recently
— fbslo (@fbsloXBT) October 4, 2024
- you can get the punk for free
- devFee allows anyone to mint 10% of the token supply to themselves (msg.sender) https://t.co/QLkCN0b17M pic.twitter.com/44XwbRcys3
The developers may have envisioned this as a clever stunt, but it’s clear that they didn’t account for the security issues that could lead to the complete loss of funds.
Avoid the Hype, Protect Your Funds
The KamalaPunk debacle is a perfect example of why caution is needed in the crypto space. Flash loans and DeFi innovations offer incredible opportunities, but they are also fraught with risks, especially when used in unregulated and highly speculative projects like KamalaPunk.
As @0xjustadev warned, the vulnerabilities in this project are glaring, and without immediate action—such as a security audit or the removal of upgradeability—buyers are almost certain to lose out.
For those navigating the volatile world of DeFi, projects like KamalaPunk should serve as a stark reminder to do your due diligence and avoid falling prey to hype-driven schemes.
HODL Team
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