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  • How Flash Loans Work
  • Some Use Cases for Flash Loans

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  1. Concepts
  2. At a Glance

Flash Loan

PreviousLiquidationNextRisks

Last updated 1 month ago

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Flash loans in Nexus Money Market allow users to borrow assets without collateral, provided they repay the borrowed amount plus a small fee within the same block. This feature unlocks powerful DeFi strategies such as arbitrage, liquidations, debt refinancing, and leveraged trading, all without requiring upfront capital.

How Flash Loans Work

  1. A user requests a flash loan from Nexus’ liquidity pool.

  2. The protocol lends the assets instantly, allowing the user to execute any desired operations (e.g., arbitrage, collateral swapping, liquidation, or leverage strategies).

  3. Before the transaction ends, the borrowed amount plus a flash loan fee must be repaid.

  4. If repayment does not occur within the same transaction, the entire operation is reverted, ensuring that liquidity remains intact.

Some Use Cases for Flash Loans

  • Arbitrage Trading: Take advantage of price differences between decentralized exchanges (DEXs) to generate profit.

  • Debt Refinancing: Swap existing collateral or shift a loan position to a different asset without supplying extra capital.

  • Liquidation Execution: Use flash loans to liquidate undercollateralized positions and profit from the liquidation bonus.

  • Leverage Strategies: Temporarily borrow assets to amplify positions without long-term borrowing commitments.