What are flashloans?
blockchain flashloans
What are flashloans ?
First let’s briefly mention what are loans.
Loans
A loan is a sum of money borrowed from a lender by a borrower, with the promise to repay it, usually with interest (a surplus amount) over a specified period of time.
A loan has the following characteristics:
| Principal | Interest | Term | Collateral |
|---|---|---|---|
| Amount Borrowed e.g. $1000 | Cost of borrowing, usually (%) e.g. 3.2% | Repayment period e.g. 36 months | Assets securing the loan (to be liquidated if the borrower doesn’t honor the agreement) e.g. the house of the borrower |
Examples
Mortgages, Personal Loans, Auto Loans, Student Loans, Business Loans
Flashloans
A flashloan is a type of loan that is unique to the decentralized finance ecosystem (DeFi). It is uncollateralized and it is borrowed and repaid within a single transaction block on a blockchain. This is often seconds or minutes.
According to our definition here are its characteristics:
| Principal | Interest | Term | Collateral |
|---|---|---|---|
| Max allowed by the protocol | Defined by the protocol e.g. 0.3% (Uniswap) | 1 transaction block (seconds or minutes) | 0 |