Educational Post What are flash loans? A traditional banking | Binance futures & spot signals

Educational Post

What are flash loans?

A traditional banking system includes secured and unsecured loans. Secured loans are the ones where the user should attach collateral. Unsecured loans there is no need for collateral as the loan will be sanctioned based on the user’s CIBIL/CRIF score. 
A flash loan is a form of trading where users can borrow an unsecured loan without any intermediary. The smart contract will monitor the transactions and will ensure that the transaction will execute when the user adheres to the rules given in the contract. 

The smart contracts are pioneered by Aave, one of the top lending protocols in DeFi. The size of the loan depends on the capital availability in the publicly funded platforms that provide flash loan services. The fees involved in this type of loans are very low (0.09% on Aave).
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