A flash loan is a type of loan in the cryptocurrency space that allows users to borrow a large amount of cryptocurrency for a very short period of time, usually just a few seconds. These loans are typically uncollateralized, meaning that borrowers do not need to put up any assets as collateral.
The borrower uses a smart contract to borrow the desired amount of cryptocurrency from a lending pool. The borrower then uses these funds to execute a series of trades or transactions that aim to exploit market inefficiencies or take advantage of arbitrage opportunities in the cryptocurrency market.
Once the trades are completed, the borrower repays the loan along with any fees or interest that may be required. If the borrower fails to repay the loan within the designated time frame, the entire transaction is reversed and any profits made from the trades are invalidated.
For any additional questions, please view our other knowledge base articles or contact a support team member via the chat button. Examples are for illustrative purposes only.