Flash Loan
Uncollateralized loan that must be borrowed and repaid within the same transaction.
A flash loan is a DeFi innovation enabling borrowing enormous amounts without collateral — on the condition that everything is returned in the same transaction (one block).
How it works: 1. Borrow $100M USDC from Aave (without collateral) 2. Use it for arbitrage, liquidations, or another operation 3. Return $100M + fee (~0.09%) in same transaction 4. If not returned, entire transaction reverts
Legitimate uses:
•Arbitrage between DEXs
•Self-liquidation of position (refinancing)
•Collateral swap without closing position
Abuse:
•Flash loan attacks — used to manipulate oracle prices and drain protocols
•Beanstalk ($182M), Euler Finance ($197M), Cream Finance ($130M)
Flash loans are a powerful tool, but also a weapon — protocol audit must account for flash loan scenarios.