Flash Loan
An uncollateralized loan that must be borrowed and repaid within a single blockchain transaction.
Flash loans are one of crypto's most unique innovations. You can borrow millions of dollars with zero collateral, as long as you repay it within the same transaction. If you can't repay, the entire transaction is reversed as if it never happened.
This is possible because blockchain transactions are atomic: everything in a transaction either succeeds or fails together. The lender has zero risk because the loan literally can't exist without being repaid.
Flash loans have legitimate uses (arbitrage, collateral swaps, self-liquidation) but have also been used in exploits. Attackers use flash loans to temporarily manipulate prices or exploit protocol vulnerabilities. As a regular USDC user, you won't use flash loans directly, but they're part of the DeFi ecosystem.
Related Terms
DeFi (Decentralized Finance)
Financial services built on blockchain smart contracts that operate without traditional intermediaries like banks.
Smart Contract
Self-executing code deployed on a blockchain that automatically enforces the terms of an agreement.
Lending Protocol
A DeFi application that lets users lend crypto to earn interest and borrow crypto against collateral.
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This definition is provided for educational purposes. USDC.org is an independent resource and is not affiliated with Circle Internet Financial.