BlockchainAdvanced#DeFi#Core Concept
Flash Loans
F
Definition
Uncollateralized loans that must be borrowed and repaid within the same blockchain transaction, often used for arbitrage.
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Concept Diagram
Key Takeaways
1
Flash loans allow borrowing massive amounts without collateral as long as repayment happens in the same transaction
2
The entire loan is atomic — if repayment fails the transaction reverts as if nothing happened
3
Commonly used for arbitrage, collateral swaps, and self-liquidation to save on gas
4
Also exploited by attackers to manipulate oracle prices in vulnerable DeFi protocols
Practical Example
You borrow $5M USDC via flash loan, buy a token on DEX A for $4.8M, sell on DEX B for $5.1M, repay the $5M + 0.09% fee ($4,500), keeping ~$295,500 profit — all in one atomic transaction with zero personal capital at risk.
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Related Terms
Blockchain
MEV (Maximal Extractable Value)The profit that can be gained by users (searchers/validators) by including, excluding, or reordering transactions in a block.
Strategy
Autonomous ArbitrageThe automated execution of trades across different exchanges to profit from minute price discrepancies.
Trading
ArbitrageThe simultaneous purchase and sale of an asset in different markets to exploit price inefficiencies for profit.
Blockchain
DEX (Decentralized Exchange)A P2P marketplace where users can trade cryptocurrencies directly without a central intermediary taking custody of funds.
Blockchain
Impermanent LossThe temporary loss of funds experienced by liquidity providers due to volatility in a trading pair within an AMM.
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