Flash Loan
Borrow millions with no collateral — if you repay in 13 seconds
Definition
A flash loan is an uncollateralized loan in DeFi that must be borrowed and fully repaid within a single blockchain transaction (one block). If the borrower cannot repay in the same transaction, the entire transaction is reversed — making flash loans essentially risk-free for the lender. Flash loans enable capital-efficient arbitrage, liquidation bots, and self-liquidation, but have also been used to exploit protocol vulnerabilities.
Example
A DeFi arbitrageur identifies that ETH trades at $3,000 on Uniswap and $3,020 on Sushiswap. Using a flash loan, they borrow $3 million of USDC from Aave at 0.09% fee, buy 1,000 ETH on Uniswap, sell on Sushiswap for $3,020,000, repay the $3,000,000 loan plus $2,700 fee, and keep ~$17,300 profit — all in a single transaction taking ~13 seconds.
Related Terms
Frequently Asked Question
What is a flash loan?
A flash loan is a DeFi loan borrowed and repaid within one transaction block — no collateral needed because the money never leaves the protocol if it isn't repaid. Used for arbitrage, but also for exploits.
APA Citation
Last updated:
· Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.