A collateral-free loan in DeFi protocols that is issued and repaid within a single blockchain transaction. If the borrower fails to return the funds plus fees before the transaction completes, the entire operation is automatically reverted as if it never happened. This eliminates the risk of non-repayment for the protocol: the money is either returned within the same transaction or the operation does not go through.
Flash loans are used for cross-exchange arbitrage, refinancing positions in lending protocols, and self-liquidations. At the same time, they can be used as a tool for attacks: a malicious actor can borrow a large flash loan, manipulate prices in a vulnerable protocol, and extract profit—all within a single blockchain transaction.
Flash loans are used for cross-exchange arbitrage, refinancing positions in lending protocols, and self-liquidations. At the same time, they can be used as a tool for attacks: a malicious actor can borrow a large flash loan, manipulate prices in a vulnerable protocol, and extract profit—all within a single blockchain transaction.