Flash Loans

What are Flash Loans?

Flash loans are unsecured, no-borrowing-limit loans in which a user borrows money and then immediately returns it. A smart contract stops the transaction and returns the money to the lender if the user is unable to pay back the loan before it is finished.

A flash loan has the power to transform anyone into an extremely well-capitalized player for a brief period—the duration of a single transaction. Flash loans' hundreds of millions of dollars in available liquidity present one-of-a-kind chances for arbitrage, liquidations, collateral swaps, and the development of leveraged positions. Additionally, it poses some hazards, particularly for a developing ecosystem of financial protocols with various levels of decentralization and security. So that customers can use more durable applications, smart contract developers should be aware of these hazards.