Flash loan
A flash loan is an uncollateralized DeFi loan that must be borrowed and repaid with a fee inside a single blockchain transaction. If it is not repaid, the whole transaction is cancelled.
How it works
A blockchain transaction either completes in full or not at all. Flash loans use this: a smart contract lends any amount available in the pool, you run a series of actions with it, and by the end of the same transaction the money comes back with a small fee. If it is short at the end, everything reverts as if nothing happened, so the pool takes no risk.
Flash loans are tools for developers and bots: arbitrage between DEXs, refinancing debt without your own capital, closing a position just before liquidation. A regular user cannot use one with a button on a website, you need your own smart contract.
The dark side is attacks. With a huge sum for a few seconds, an attacker can push the price in a small pool, fool a protocol's weak oracle and drain funds. The flash loan is not the bug itself, it just supplies the capital to exploit weak code.
A bot sees a token at $1.00 on one DEX and $1.005 on another. It flash-borrows 100,000 USDC, buys on the cheap side, sells on the expensive side and ends with 100,400 USDC after slippage. It repays 100,000 plus a 0.09% fee ($90) and pays ~$30 gas. Profit is about $280, all in one transaction.
A common mistake is believing ads for "flash loan profits with no money down" and buying ready-made bots or scripts. These are almost always scams that drain your wallet. Real flash loan arbitrage needs programming skill, competes with professional bots and often makes nothing.
Questions and answers
What is a flash loan in simple terms?
It is a loan with no collateral that lasts one transaction. You borrow, do something with the money and repay at once, or the whole thing is cancelled.
Can a beginner make money with flash loans?
Practically no: you need your own smart contract and to be faster than professional bots. Offers of a "ready flash loan bot" are usually scams.
Why are flash loans used in hacks?
They give enormous capital for an instant. That is enough to distort the price in a thin pool and trick a protocol with a weak oracle.
Related terms
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Updated: 2026-10-19