Understanding Flash Loans
I was always wondering how Flash loans actually work, how can we get uncollateralized loan on blockchain. I got better understanding of Flash loans while solving Free Rider problem. In this post, I tried to explain how Flash loans actually work using pseudo code. If you want to have a look at actual solidity code. See Reference section. What are Flash Loans? Flash loans are uncollateralized loans in DeFi. They enable users to borrow liquidity instantly without any collateral. There is a catch, the borrowed amount needs to be paid back in the same transaction, along with some fees which can vary for different protocols. It’s a bit difficult to understand how this actually happens, so we will look at some code examples to understand how this is achieved. ...
