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Creating a Simple Flash Loan
The Ultimate Guide to Arbitrage and Profit
Introduction
In the world of decentralized finance (DeFi), flash loans have emerged as a powerful tool for arbitrage, liquidations, and other financial operations that require a large amount of capital in a short period. The beauty of flash loans is that they allow you to borrow assets without collateral, as long as you return them within the same transaction. This opens up a plethora of opportunities for savvy developers and traders.
In this article, we’ll walk you through the process of creating a simple flash loan smart contract that performs the following steps:
- Borrow DAI from Aave
- Buy ETH with DAI on ExchangeA
- Sell ETH for DAI on ExchangeB
- Repay Aave loan
- Keep the profits
By the end of this guide, you’ll understand not only the mechanics of flash loans but also their utility in the DeFi ecosystem. We’ll use Solidity for the smart contract and integrate with Aave and two decentralized exchanges.
Prerequisites
- Solid understanding of Solidity and Ethereum smart contracts
- Basic knowledge of Aave and decentralized exchanges
