Flash Loans Explained: Borrowing Millions with Zero Collateral

Flash loans let you borrow unlimited crypto with zero collateral — if you return it in the same transaction. Here is how they work and what they are used for.

Flash loans are one of the most extraordinary innovations in DeFi: a loan of any size, requiring zero collateral, that must be borrowed and repaid within a single blockchain transaction. If the loan is not repaid by the end of the transaction, the entire transaction is reversed as if it never happened. This creates a powerful tool for arbitrage, liquidations, and collateral swaps.

How Flash Loans Work

Legitimate Uses of Flash Loans

Flash Loan Attacks

Flash loans have also been used to exploit vulnerable DeFi protocols. By borrowing large amounts and manipulating oracle prices within a single transaction, attackers have stolen hundreds of millions. Notable exploits: bZx (2020, $1M), Pancake Bunny (2021, $45M), Mango Markets (2022, $116M). Steyble only integrates protocols with oracle manipulation resistance — time-weighted average prices (TWAP) rather than spot price oracles.