Flash Loan
An uncollateralized on-chain loan that must be borrowed and repaid within a single transaction, enabled by composable DeFi.
Flash loans allow borrowing large amounts briefly to execute arbitrage, collateral swaps, or liquidations. If not repaid by transaction end, the entire transaction reverts.
A trader borrows stablecoins via a flash loan, performs an arbitrage across two DEXs, repays the loan, and keeps the profit—all in one transaction.
Protocol design flaws or oracle manipulation can enable exploits using flash loans as capital. Proper price oracles and circuit breakers reduce attack surfaces.
An attacker uses a flash loan to move prices in a thin pool, triggering under-collateralized borrowing and extracting funds due to weak oracle safeguards.
Related Terms
Decentralized Exchange
→A decentralized exchange (DEX) is a platform that allows users to trade digital assets directly with each other, without the need for an intermediary, such as a brokerage or bank.
DeFi
→DeFi, or Decentralized Finance, is a revolutionary sector in the blockchain industry that uses smart contracts to create permissionless financial services that are open to everyone and operate without intermediaries.
All terms and definitions may update as the Cryptionary improves.
