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Onchain Economics
DeFi Primitives

Flash Loan

An uncollateralized loan that must be borrowed and repaid within a single blockchain transaction.

In-Depth Explanation

Flash loans exploit blockchain atomicity: if the loan isn't repaid by transaction end, the entire transaction reverts as if it never happened. This enables arbitrage, collateral swaps, and self-liquidation without capital. Flash loans are DeFi-native innovation but also power many exploits—attackers use them to manipulate prices or drain protocols.

Related Terms

Arbitrage

Profiting from price differences of the same asset across different markets or venues.

Exploit

An attack that takes advantage of a vulnerability in a smart contract or protocol to steal funds.

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Automated Market Maker

AMM

A smart contract that provides liquidity and enables trading using a mathematical formula instead of an order book.

Liquidity Pool

LP

A smart contract holding paired assets that enables trading, lending, or other DeFi activities.

Collateralized Debt Position

CDP

A loan where users deposit collateral to mint or borrow assets, with liquidation risk if collateral value falls.

Lending Protocol

A DeFi application that matches lenders with borrowers through smart contracts, enabling permissionless borrowing and lending.

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