Flash loans generally exploit financial protocol vulnerabilities to manipulate the prices and exploit the system. For example, In the 2020 attack on Fulcrum built using bZx protocol, attackers used borrowed Ether to manipulate the price of sUSD( a stable coin); naturally, the price of the stable coin should have remained stable to prevent the attack. Smart contract writers should have anticipated the instability of stable coin prices under unusual market conditions. Formal verification methods would have identified this hidden issue.
Theoretically, these higher protocols are influenced by the underlying blockchain technology, which results in unreliable smart contract state estimation.
Cardano has brought the "Formal Methods" paradigm in creating smart contracts, enabling precise estimation of smart contracts behaviors provably. Moreover, Plutus is designed with such care to enable this technology. The potential of this mathematical precision has not yet been realized in the current ETH-dominated DeFi. In short, Cardano will prevent this type of protocol attacks by enabling smart contract writers to predict what can go wrong in which setting.