What is the intuition behind the implementation of a flashloan?

In the flashloan world we have 2 entities: the Lender and the Borrower.

The Lender lends tokens to the borrower and makes sure that they are returned before the end of the transaction (plus a fee).

The Borrower is asking for tokens, does some actions that will hopefully increase the value of the borrowed money and then returns the borrowed amount plus a fee.

In pseudocode:

Lender {
    function borrow(amount) {
        send amount of tokens to the caller
        trigger caller's onFlashLoan function
        ensure (amount + fee) tokens were returned
    }
}

Borrower {
    function borrowTokens(amount){
        lender.borrow(amount);
    }

    function onFlashLoan(amount) {
        ensure the caller is the lender
        do arbitrage with the borrowed amount
        return the borrowed amount + fee
        keep profit
    }
} 

As we see the borrower is not an EOA (Externally Owned Account) but a smart contract as well that can execute actions with the borrowed liquidity. Typically, the actions that are executed yield profit more than the fee charged by the Lender. The profit then is either kept in the borrower with some mechanism to withdraw it or it can be sent to a pre-set EOA.

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