Flash loan protocols

Flash loans are a unique feature of decentralized finance (DeFi), specifically introduced and popularized by the Aave protocol. A flash loan allows a user to borrow any available amount with zero collateral, provided the loan is returned within the same transaction block. This feature enables various complex operations that are typically not possible in traditional finance, such as arbitrage or batched transactions 1.

Flash loans have spurred considerable creativity and innovation within the DeFi community. They allow developers to create complex financial products that can interact across multiple DeFi platforms within a single transaction. This has led to both positive use cases, such as arbitrage and collateral swaps, and negative incidents, such as protocol exploits 2.

Despite their potential for misuse, flash loans serve as a powerful tool for developers, enabling functionalities that push the boundaries of what's possible within DeFi ecosystems 2.