Flash Loan
An uncollateralized loan that must be borrowed and repaid within a single blockchain transaction, or it never happens at all.
A flash loan lets you borrow millions with no collateral, on one condition: you repay it before the same transaction ends. If you cannot, the whole transaction reverts as if it never occurred, so the lender never risks a loss. It exists only because blockchains settle atomically.
Honest uses include arbitrage and swapping collateral in a single step. But flash loans are also a favorite tool for attackers, who borrow huge sums to manipulate prices or drain a vulnerable protocol, then repay within the same block. Several nine-figure DeFi hacks started this way.
Related terms
Financial services run by code on public blockchains, letting people trade or borrow without a bank.
ArbitrageProfiting from the same asset trading at different prices in two places by buying low and selling high.
Smart ContractSelf-executing code on a blockchain that runs exactly as written when its conditions are met, with no party able to intervene.
Lending ProtocolA DeFi platform where users deposit crypto to earn interest and others borrow against collateral, all managed by smart contracts.