Flash Loans are introduced by the Aave, an open-source lending protocol for anyone to deposit and borrow cryptographic assets. Essentially, flashloans let users borrow any amount up to the total liquidity available without any collateral, so long as the loan is repaid in the same transaction. If the loan is not repaid, the whole transaction will be reverted. With flashloan anyone can access a massive amount of liquidity, and use the loan with other protocols however they want. You can become a ‘whale’ without any capital.
At the time of writing, there are three pools providing flashloans:
Aave: 22 tokens available with 0.09% fee
dYdX: 3 tokens available zero fee *
Uniswap V2: 100+ tokens available with 0.3% fee
*Note that flashloan on dydx is not a consumer feature.It is achieved by developers chaining Withdraw, Call and Deposit actions.
We summarize the use cases:
(Debt) Interest rate swap
(Debt) Currency swap
The most popular use case by far is Arbitrage trades. For those unfamiliar, arbitrage is the strategy of making a profit from price differences between different markets. To make a significant amount of profit, you will need substantial capital to get started. And this, is where the magic happens — We use flashloan to generate free money with no upfront cost.
There are some important things to understand:
For arbitrage traders, Furucombo lowers the barriers-to-entry for building money legos, providing all the necessary elements to create arbitrage strategies including the so far coder-only flashloans. But, please keep in mind that Furucombo does NOT find arbitrage opportunities for you. You will have to find it yourself. ✊🏻
Enough with the disclaimer, let’s get to the checklist. 👇🏻
Find an arbitrage opportunity >0.09% to cover flashloan's feeHave some ETH in your wallet enough to pay for gas
The example we use in the following is an arbitrage opportunity found between KyberSwap and Uniswap V1 a few months ago.
Rate difference: 20+%1 DAI = 1.2411 sUSD on Uniswap1 sUSD = 0.9927 DAI on Kyberswap👉🏻 Buy low sell high: Buy sUSD on Uniswap and sell it on Kyberswap
Now you found the rate difference, let’s start creating the combo. The complete combo should look like this:
Borrow 100DAI from FlashloanSwap 100DAI to 122.83649sUSD on UniswapSwap 122.83649sUSD to 122.83429DAI on KyberswapRepay 100.09DAI to FlashloanYou keep 22.74429DAI profit.
1️⃣ Click the cube with '+' symbol2️⃣ Choose 'Swap Token' under Uniswap V1 section3️⃣ Enter Input: 100DAI4️⃣ Output generated from Uniswap: 122.83649sUSD5️⃣ Click 'Set'
1️⃣ Click the cube with '+' symbol2️⃣ Choose 'Swap Token' under Kyberswap section3️⃣ Enter Input: 122.83649 sUSD4️⃣ Output generated from Kyberswap: 122.83429 DAI5️⃣ Click 'Set'
1️⃣ Click the cube with '+' symbol2️⃣ Choose 'flashloan' under Aave section3️⃣ Enter amount: 100DAI4️⃣ Click 'Set'5️⃣ Two cubes appear. 1st cube is borrow 100DAI and 2nd cube is payback 100.09DAI.
This is simply adjusting the execution order. You want to borrow from flashloan at the very beginning to have the upfront capital. So, just click and drag the borrow cube to the top and keep the payback cube at the bottom.
The final combo would look like...
🎉 Bravo! You’ve made money with zero capital. Don’t forget to share your result on Twitter. 🎉