What are Flash Loans?

Flash loans are a type of uncollateralized lending that have become very popular in decentralized finance (DeFi), which can be used across decentralized finance protocols based on the Ethereum network, and more recently on Binance Chain.

Aave flash loans works like a borrower can request funds from Aave, but he/she must pay back those funds with a 0.09% fee, within the same block. If the borrower fails to do so, the entire transaction will get cancelled, so that no funds were ever borrowed. In other words, Flash loan is an instant loan with one condition saying it must be repaid within a single Ethereum transaction. The biggest flash loan Aave has processed to date was about $200 million.

Aave is a borrowing and lending platform that enables flash loans, which are rapidly executed loans that are paid back in quick succession without the need for collateral. In other words, Flash loan is an instant loan with one condition saying it must be repaid within a single Ethereum transaction.

Here is the list of Top 10 Users addresses by label and amount borrowed, who are using Flash loans on Aave in the past 6 months.

This bar graph depicts the Total fees charged for FlashLoan transactions in the past 6 months on Aave network

This bar graph depicts the Monthly average volume of FlashLoan transactions in the past 6 months on Aave network

This bar graph depicts the daily volume of FlashLoan transactions in the past 6 months on Aave network

This bar graph depicts the daily average volume of FlashLoan transactions by Symbol/Currency in the past 6 months on Aave network

References:

• https://aave.com/flash-loans/
• https://www.quicknode.com/guides/defi/how-to-make-a-flash-loan-using-aave
• https://www.bloomberg.com/news/articles/2021-02-07/flash-loans-are-providing-instant-cash-to-crypto-speculators
• https://docs.aave.com/developers/guides/flash-loans

An Aave Flash Loan can be thought of in three simple steps:

• A user borrows tokens from one of Aave’s lending pools
• The parameters for the loan are executed on the Ethereum blockchain
• The user must repay the borrowed amount plus Aave’s 0.09% loan service fee

Aave Flash Loans are conducted within a single Ethereum transaction and rely on the fact that Ethereum transactions can be reverted, so if the borrowed capital is not repaid, all commands are null and void. But, the only condition of Ave Flash Loans is that you must pay back the initial investment capital before the transaction is completed. All transactions made with the principal during the loan term are also void by default if that condition is not met.

This visual shows the daily volume of FlashLoan transactions in the past 6 months on Aave network