Flash Loan
An uncollateralised DeFi loan that must be borrowed and repaid within a single blockchain transaction.
Flash loans are a DeFi primitive unique to blockchain: a user can borrow any amount of funds with no collateral, provided the full amount plus a small fee is repaid before the transaction ends. If repayment fails, the entire transaction reverts as if it never happened — the protocol bears no risk.
They are legitimately used for collateral swaps, arbitrage between DEXs, and self-liquidation. They are also the weapon of choice in many DeFi exploits — attackers borrow large sums to manipulate oracle prices or drain poorly designed protocols, then repay in the same transaction.
Aave pioneered flash loans in 2020. They have since become a standard feature of major lending protocols and represent a genuinely novel financial instrument that has no direct equivalent in traditional finance.