▶What's a flash loan and why is it different from a normal loan?
A flash loan is borrowed and repaid in a single Ethereum transaction block. No collateral needed, no credit check. You can borrow $1M for one block (12 seconds). You must repay principal + 0.05% fee by end of block or transaction reverts. Normal loans require collateral and time. Flash loans exist only in smart contracts.
▶How do you make money with a flash loan?
1) Arbitrage: borrow on AAVE, buy on Uniswap v2 (cheaper), sell on Uniswap v3 (pricier), repay loan + fee, pocket spread. 2) Liquidation: borrow to liquidate an underwater position, capture liquidation bonus. 3) Collateral swaps: borrow USD, repay loan in different collateral. Profit = price difference - gas - 0.05% fee.
▶Whats the 0.05% AAVE flash loan fee in dollars?
On a $1M flash loan: 0.05% = $500 fee. Plus gas (typically $300-2000 depending on complexity). You need spread of >$2k to profit. Smaller loans ($100k) need 2%+ spread. High-cap, low-volatility pairs have thin spreads; risky assets have wider gaps.
▶Can I lose money with a flash loan?
Yes. If your arbitrage spread is $200 but gas is $1500, you lose. If sandwich attackers front-run your trade, slippage eats your profit. If logic is wrong, transaction reverts and you lose gas. Liquidation competition is fierce: thousands of bots run simultaneously.
▶How does MEV and sandwich attacks affect flash loans?
Maximal Extractable Value (MEV) is the value miners/validators extract by reordering or including transactions. A sandwicher sees your profitable flash loan in mempool, places their own tx before and after yours, and extracts your profit. Mitigations: private mempools (MEV-Guard, MEV-Protect), encrypted transactions, covenants.
▶What programming language do you use for flash loans?
Solidity exclusively. Flash loans are smart contract functions that must execute atomically in one EVM transaction. You can call helper libraries in Python/JavaScript, but core logic is Solidity. Hardhat or Foundry for testing and deployment.
▶What's the capital requirement to profit from flash loans?
Zero capital needed for the flash loan itself (you borrow). But you need capital for: 1) Gas fees ($300-5000 per trade), 2) Collateral for liquidations if you're borrowing from AAVE for other purposes, 3) Testing and failed transactions (expect 30-50% failure rate as bots compete). Plan for $1-10k in losses while learning.