Understanding Flash Loan

A loan that is borrowed and repaid in the same transaction. Flash loans allow users to borrow tokens without any collateral and use them for DeFi activities such as arbitrage and liquidation.

Flash Loans are not loans as we commonly understand them. It takes advantage of atomicity - the ability for multiple actions to be done within the same transaction - to borrow from one place, profit from another, and repay the borrowed amount all within the same transaction. In this way, you are able to ‘borrow’ without providing collateral or any personal information. However, Flash Loans may be suitable for only a subset of traders, as utilizing it requires some technical knowledge.

  • Faiz Adnan