What are flash loans?

A flash loan is a smart contract that enables you to borrow a large amount of money without putting in any collateral. But there is a catch, you have to pay back the loan in the same transaction where you borrowed the loan. I know it seems impossible, but it isn't. For the sake of simplicity let's say you have to pay the loan back within 13 secs of borrowing it!

Usage

To understand flash loans through examples, first, let's understand some terms.

Trading arbitrage

When you check out different cryptocurrency exchanges, let's say Coinbase and Binance. You will notice a slight price difference in the pricing of the same cryptocurrency. This is called trading arbitrage.

Suppose you borrow 100,000,000$ for free using flash loan. You then go to Coinbase and buy a token of 1$ with all of the money, then go to Binance and you see the same token is priced 1$ and 50 cents. You sell all your tokens and earn a profit of 50,000,000$! And then you return the loan with interest(about 0.1 percent) So after the interest deduction, you earned a badass profit of 40,000,000$! (40 Million Dollars)!!

Can I execute flash loans?

Yes! You can. All you need is a lending and borrowing platform and the ability to create smart contracts.

Getting rich??

As many tech-savvy people know about these flash loans. They have automated this process, they made bots and computer programs to create these smart contracts when there is a arbitrage.

So now it is very unlikely to take advantage of this:(