Flash Loan

Here's a concept that sounds impossible: borrowing millions of dollars with zero collateral. Flash loans make it work by adding one strict rule—you have to pay it all back in the same transaction. If you can't, the blockchain rewinds everything as if it never happened. The lender's risk? Effectively zero.

This works because blockchain transactions are atomic—they either complete in full or revert entirely. A flash loan bundles multiple steps into one transaction: borrow funds, do something useful with them, then repay. If any step fails, the whole thing unwinds.

Legitimate uses are genuinely clever. Arbitrage (profiting from price differences across exchanges), collateral swaps (switching your collateral type without closing a position), self-liquidation (repaying debt to dodge liquidation penalties), and interest rate refinancing—all in a single transaction.

Flash loan attacks get more headlines, though. Attackers borrow huge amounts, temporarily manipulate prices or exploit oracle vulnerabilities (faulty price feeds), and drain funds from vulnerable protocols—all in one transaction. Major attacks have stolen millions this way.

Providers like Aave and dYdX charge a small fee—typically 0.09% of the borrowed amount. The barrier to entry is high: you need to write smart contract code that orchestrates every step within a single transaction. Tools like Furucombo have tried to make this more accessible through visual interfaces, but it's still firmly in advanced-user territory.