A re-entrancy attack occurs as a result of making an external call to an unsecured network and a fraudulent person exploiting the call function. Re-entrancy attacks are very dangerous to a network and can lead to a potential breakdown of the platform. Though this type of attack occurs in all spheres of computer networks, it has gained fame over the years in the blockchain.
Re-entrancy attacks can occur to a smart contract causing a loss of all tokens. If a smart contract contains a fallback option, a fraudster may rely on this to re-write the code and exploit the system through a call action and then transfer all assets to their wallets. An example was the infamous DAO attack.
In 2016, the DAO scandal led to a loss of millions leading to the controversial hard fork of Ethereum blockchain. A good smart contract must be able to prevent re-entrancy attacks before it gets out of hand.