Plain English
A flash loan lets you borrow any amount of capital with no collateral — as long as you pay it back inside the same transaction. If you cannot repay, the entire transaction reverts as if nothing happened. Used for arbitrage, collateral swaps, liquidations, and unfortunately a steady stream of exploits.
How it actually works
Atomicity is the trick: the EVM rolls back state if any step fails. A flash loan borrows tokens, performs arbitrary operations, repays the loan + fee, and only commits to chain if everything balances. Aave, dYdX, and Balancer all offer flash loans; fees are typically 0.05–0.1%.
What it means for you
Flash loans are a power tool — useful legitimately for collateral migrations, refinancing positions, or arbitraging across DEXes. For HNW users, they enable strategies like swapping the collateral backing a loan without unwinding the loan first. They are also the most common attack vector for protocol exploits, which is why audits matter.
Will this information be valuable to you?
Already a member? Send this term to your coach inside the community and tell them exactly what you need help with — we will build a plan around it.
New here? Join the membership, become a student, or sit in on the community. Your starting point is one short call.
Educational content only. Not investment, tax, or legal advice.