Uncollateralized loans that must be borrowed and repaid within a single blockchain transaction.
Borrow
A smart contract requests a large amount of a token from a lending pool, with no upfront collateral.
Use
Within the same transaction, the borrowed funds are used - for example, swapped across two markets.
Repay
The original amount plus a fee must be returned to the pool before the transaction ends.
Atomic revert
If repayment fails for any reason, the entire transaction reverts as if nothing happened - the lender can never be left unpaid.
Flash loans exist because blockchain transactions are atomic: every step inside a transaction either all succeeds or all reverts together. This lets a lending protocol give out an uncollateralized loan safely, because it can guarantee repayment happens before the transaction is allowed to finalize.
They are mainly used for capital-efficient operations that only make sense at large scale for a few seconds: collateral swaps, self-liquidations, and reacting to price differences between markets.
The main risks are technical, not financial in the traditional sense: smart contract bugs, gas cost spikes, and the same atomicity that protects lenders can be used to manipulate poorly designed price oracles within a single transaction.
Can I lose money with a flash loan?
You cannot lose the borrowed principal itself (the transaction reverts if you can't repay it), but you can still lose the gas fee you spent attempting the transaction, and any of your own funds used alongside the loan.
Do flash loans guarantee profit?
No. They are a financing tool, not a strategy. Whether a specific use of a flash loan is profitable depends entirely on market conditions at that exact moment and competition from other transactions.
Want to see the math with numbers you control?
Open the simulator