What is a flash loan?
A flash loan is a type of DeFi loan that requires no collateral, with one condition: the loan must be repaid within the same blockchain transaction. If the repayment doesn't happen, the entire transaction is automatically reversed — as if it never occurred.
How flash loans work
- You request a flash loan (e.g. $1 million USDT)
- The loan is sent to your smart contract
- Your contract executes its strategy (arbitrage, liquidation, etc.)
- Your contract repays the loan + fee in the same transaction
- If step 4 fails, the entire transaction reverts
Legitimate uses of flash loans
- Arbitrage — exploit price differences between DEXs in a single transaction
- Liquidations — liquidate undercollateralised positions for profit
- Collateral swaps — change collateral type without closing a position
- Self-liquidation — repay a loan without needing upfront capital
Flash loan attacks
Flash loans have been used in DeFi attacks — borrowing large amounts to manipulate prices or exploit protocol vulnerabilities. These attacks highlight the importance of robust oracle design and smart contract security.
Flash loans and TurboLoop
TurboLoop's fixed-yield model is not vulnerable to flash loan attacks because it doesn't rely on price oracles for its core yield mechanism.