Flash loans are a unique tool of the DeFi tech stack that allow users to take a loan without the need of collateral. In this case, users are able to borrow assets from a designated smart contract liquidity pool, without risk, as long as they return the assets by the completion of the transaction.
A strategy must be formulated beforehand, in efforts of executing a profitable flash loan, since fees are involved while executing the flash loan (though UniLend flash loans are much more gas-efficient and cost-effective than other leading Flash Loans products). Often flash loans are taken for specific DeFi strategies, one of the most popular being arbitrage plays, though they can be used for any task required.
Read more about UniLend flash loans here: https://docs.unilend.finance/the-protocol/flash-loan/performing-flashloan
Flash Loan Example
An example of a flash loan carried out via UniLend can be found here: https://etherscan.io/tx/0xc6c2add63c0dc951d2598c43f1993f66d91bbfa3791186945c574e5c7d3b5179
In this example, the user borrowed 150,000 UFT without providing any liquidity on UniLend, repaid the 150,000 UFT plus the flash loan fee of 75 UFT, and completed all these actions within one single transaction. 22.5 UFT was taken for initiatives which benefit the UniLend community.
Please note that executing a flash loan is a complex transaction and the user should have a sound understanding of Solidity to fully comprehend the structure and models used within the smart contracts.
For developers, here is the structure of how to call the flash loan:
Flash Loan Use Cases / Applications
Flash loans can be a great way to arbitrage between decentralized exchanges without providing initial liquidity. For example, if a user uses two DEXs, they are able to borrow an asset, swap it on exchange 1, and then commit a swap for exchange 2 for an arbitrage play, and repay the loan. Any amount left after repaying the loan is profit for the user.
Flash loans can also become a temporary market maker for decentralized limit order book exchanges. For example, Uniswap v3 utilizes limit spread bids. A user could potentially place a large limit order to trick any of the bots that are scanning the smart contracts into going into buy positions momentarily or trick the bots to go into sell positions momentarily by providing a large limit order to sell.
Other use cases include liquidation of crypto loans or refinancing crypto loans.
Alpha Leak: UniLend Flash Loans Grants Program Coming soon
There are many more use cases for flash loans, many of which are still to be discovered. Therefore, in order to encourage adoption and accelerate innovation, the UniLend team is planning to launch a grants program for flash loans integrations. Multiple partners are already exploring use cases of our flash loans solution.
We will share more details on the grants program and partner implementations in the near future. Keep an eye on our announcement channel.
UniLend App: https://app.unilend.finance/
You can stake your tokens using this link
Implementing Flash Loans
There are multiple methods of implementing flash loans, depending on your preferred approach. Please use the below links for further details.