Flash Loan is the ability to take a loan without collateral for a single transaction on the DeFi platform. Used by traders to earn on the floating exchange rate.
Generally, DeFi-platforms provide loans up to 75% of the collateral amount. In such cases, to profit from the exchange, it is necessary to invest your own money. With Flash Loan, you can make a profit, having only the amount to pay commission to the exchange.
Flash Loan works as follows: a trader takes a loan, buys cryptocurrency, sells it at a higher rate, and returns the loan. The trader’s profit is the exchange rate difference minus the commission to the exchange.
Flash Loan has received a lot of criticism, as it is often used in hacker attacks on DeFi solutions.