DeFi 10130 August 2021

Flash Loans - The DeFi Lending Phenomenon Explained

Flash Loans

Summary

· Flash loans are uncollateralized lending

· Flash loans are popular in decentralized finance (DeFi).

· Flash loans can be exploited to attack vulnerable DeFi protocols

Flash loans are a new-age type of lending that does not require collateral, popular across decentralized finance protocols on blockchain networks. Flash loans are unsecured and instant, mostly used on the Ethereum ecosystem.

Asset holders take advantage of flash loans to benefit from the exchange rate difference while converting the borrowed token to a different one in the Ethereum ecosystem.

While helpful, flash loans have been on the news recently due to their rampant use by hackers to defraud DeFi protocols, causing losses in millions.

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