# Flash Loans

<figure><img src="/files/XdH6q2bMb9H8YCcmTBjC" alt=""><figcaption></figcaption></figure>

Flash Loans let you borrow an asset without posting collateral, provided the borrowed amount plus a fee is returned before the transaction ends. Because everything settles within a single transaction, you may see these referred to as "one-block borrows"\
\
There is no real-world equivalent for flash loans; they rely on how blockchain state is updated within a block. This is an advanced feature intended for developers who are comfortable with the EVM, Solidity, and smart contract patterns.

### Overview

Flash loans allow access to pool liquidity (only for reserves where borrowing is enabled) for the duration of one transaction, as long as either:

* the borrowed amount + fee is returned by the end, or
* a debt position is opened by the end (if permitted).

Tydro exposes two methods:

#### `flashLoan()`

* Borrow from multiple reserves in a single transaction.
* At completion you may \
  1\) repay amount + fee, or\
  2\) open a variable-rate debt position backed by posted collateral or via credit delegation.
* Note: the flash loan fee can be waived for approved `flashBorrowers` (managed by ACLManager).

#### `flashLoanSimple()`

* Borrow from a single reserve for the transaction.
* The fee is not waived and no debt position can be opened at the end.
* Optimized for gas when you only need a basic, single-asset flash loan.

### Execution Flow

Practical mental model for implementation:

1. Request: Your contract calls the Pool and requests a flash loan of specific amount(s) of one or more reserve(s) via `flashLoanSimple()` or `flashLoan()`.
2. Transfer + Callback: After checks, the Pool transfers the requested amounts to your contract and then calls your receiver’s `executeOperation()`.
3. Your Logic: With funds in hand, your contract runs arbitrary logic.
4. Settlement:
   * For `flashLoanSimple()`: before finishing, approve the Pool to pull back amount + fee.
   * For `flashLoan()`: for each reserve, depending on the `interestRateMode` you passed, either\
     a) approve the Pool for amount + fee, or\
     b) ensure sufficient collateral or credit delegation is in place to open a debt position.
5. Atomicity: If the owed amount is not available (insufficient balance, missing approval, or insufficient collateral for debt), the entire transaction reverts.
6. Block scope: Everything above happens within a single transaction (i.e., one block).

### Applications of Flash Loans

Tydro Flash Loans are already used with Tydro for liquidity switch feature. Other examples in the wild (and supported with Tydro) include:

* **Arbitrage**: Arbitrage between assets, without needing to have the principal amount to execute the arbitrage.
* **Liquidations:** Liquidating borrow positions, without having to repay the debt of the positions and using discounted collateral claimed to payoff flashLoan amount + fee.

### Flash loan fee

* The flash loan fee is initialized at **0.05%**. The current value can be queried through `FLASHLOAN_PREMIUM_TOTAL`.
* The total fee paid by borrowers can be shared between LPs and the protocol treasury:
  * Fee to LPs: `FLASHLOAN_PREMIUM_TOTAL - FLASHLOAN_PREMIUM_TO_PROTOCOL`
  * Fee to Protocol: `FLASHLOAN_PREMIUM_TO_PROTOCOL`
* At initialization, `FLASHLOAN_PREMIUM_TO_PROTOCOL` = 0.

### Step by step

#### 1. Setting Up

* Your receiver must implement [`IFlashLoanSimpleReceiver`](https://github.com/aave-dao/aave-v3-origin/blob/main/src/contracts/misc/flashloan/interfaces/IFlashLoanSimpleReceiver.sol) or [`IFlashLoanReceiver`](https://github.com/aave-dao/aave-v3-origin/blob/main/src/contracts/misc/flashloan/interfaces/IFlashLoanReceiver.sol), including the `executeOperation()` function.
* Because the Pool pulls repayment, your contract must approve the Pool to spend the borrowed amount + premium.

#### 2. Calling flashLoan() or flashLoanSimple()

There are three ways to initiate:

* From an EOA: Send a transaction to the Pool calling `flashLoan()` or `flashLoanSimple()`. See the Pool docs for parameters, and use your receiver address from step 1 as `receiverAddress`.
* From a different contract: Same as above; ensure `receiverAddress` is your receiver from step 1.
* From the same contract: Call the method with `receiverAddress = address(this)`.

> **Security note:** Do **not** keep funds permanently on your receiver / [`FlashLoanReceiverBase`](https://github.com/aave-dao/aave-v3-origin/blob/main/src/contracts/misc/flashloan/interfaces/IFlashLoanReceiver.sol). Idle funds can be griefed (e.g., siphoned during forced interactions).

#### 3. Completing the flash loan

**Immediate repayment**

* If you used `flashLoanSimple()` or passed `interestRateMode = 0` for any asset in the `modes` parameter of `flashLoan()`, you must repay immediately.
* Ensure your contract holds amount + premium for each relevant asset. You can compute this from the `amounts`and `premiums` arrays received in `executeOperation()`.
* You do not manually transfer funds back; the Pool pulls repayment when your call returns.

**Incurring a debt**

* If you passed `mode = 1` or `mode = 2` for any asset in `modes`, the `onBehalfOf` address will incur the debt, provided it has previously approved the `msg.sender` to borrow on its behalf.
* You can mix behaviors: some assets repaid immediately, others converted into debt.

### Notes

* Tydro does **not offer a UI** for flash loans. This is a **developer-only feature** available via smart contracts.


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