What are Flash Loans ?

Today we’re going to Discuss about What are Flash Loans & How does it Works ?

What are Flash Loans ?
The conventional banking system consists of secured and unsecured loans. Secured loans are where the user has to attach collateral. Unsecured loans do not require collateral as the loan will be sanctioned based on the user’s CIBIL/CRIF score.

Flash loans are a form of trading where users can take unsecured loans without any intermediary. A smart contract will monitor transactions and ensure that the transaction is executed when the user follows the rules specified in the contract.

Smart contracts are pioneered by Aave, one of the top lending protocols in DeFi. The size of the loan depends on the availability of capital in publicly funded platforms that provide flash loan services. Fees involved in this type of loan are very low (0.09% on Aave).