零点课堂 | What Are Flash Loans in DeFi? (1)

Introduction

There's much fanfare in the cryptocurrency space about reinventing the legacy financial system, but on the blockchain. Skeptics may disagree with the idea, but there's definitely some interesting infrastructure being built on that front.
Indeed, the whole purpose of DeFi (or decentralized finance) is to bring to life a permissionless, decentralized, and transparent financial ecosystem on top of blockchain networks. Cryptocurrency proved that it was possible to do it with money. Every day, systems like Bitcoin are used to transfer value all around the globe.
The new wave of DeFi technologies promises an additional layer. Today, you can take out crypto-backed loans, trustlessly exchange digital assets, and store wealth in coins that mimic the price of fiat currencies.
In the following piece, we're going to look at a specific category of loans – flash loans. As we'll soon see, these are truly unique additions to the growing decentralized finance stack.

How do regular loans work?

Most of us understand how a regular loan works. Still, it's worth reiterating so that we can make the comparison later.

Unsecured loans

An unsecured loan is a loan where you don't need to put forward any collateral. In other words, there isn't an asset you agree that the lender can have if you don't repay the loan. For example, suppose that you really want a $3,000 gold chain with the Binance logo hanging from it. You don't have the cash available to you, but you will when you get paid next week.

You speak to your friend Bob. You explain to him how badly you want this chain, how it will improve your trading game by at least 20%, and he agrees to lend you the money. On the condition, of course, that you repay him as soon as your paycheck comes in.

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零点课堂 | What Are Flash Loans in DeFi? (1)

2021-04-15 14:57:26

Introduction

There's much fanfare in the cryptocurrency space about reinventing the legacy financial system, but on the blockchain. Skeptics may disagree with the idea, but there's definitely some interesting infrastructure being built on that front.
Indeed, the whole purpose of DeFi (or decentralized finance) is to bring to life a permissionless, decentralized, and transparent financial ecosystem on top of blockchain networks. Cryptocurrency proved that it was possible to do it with money. Every day, systems like Bitcoin are used to transfer value all around the globe.
The new wave of DeFi technologies promises an additional layer. Today, you can take out crypto-backed loans, trustlessly exchange digital assets, and store wealth in coins that mimic the price of fiat currencies.
In the following piece, we're going to look at a specific category of loans – flash loans. As we'll soon see, these are truly unique additions to the growing decentralized finance stack.

How do regular loans work?

Most of us understand how a regular loan works. Still, it's worth reiterating so that we can make the comparison later.

Unsecured loans

An unsecured loan is a loan where you don't need to put forward any collateral. In other words, there isn't an asset you agree that the lender can have if you don't repay the loan. For example, suppose that you really want a $3,000 gold chain with the Binance logo hanging from it. You don't have the cash available to you, but you will when you get paid next week.

You speak to your friend Bob. You explain to him how badly you want this chain, how it will improve your trading game by at least 20%, and he agrees to lend you the money. On the condition, of course, that you repay him as soon as your paycheck comes in.

声明:本文由 Binance撰写,零点财经收录,观点仅代表作者本人,绝不代表零点财经赞同其观点或证实其描述。