Risk-free uncollateralized lending in decentralized markets : an introduction to flash loans

A flash loan is a special type of uncollateralized loan with zero default risk that is native to blockchain ecosystems. Since its inception in 2018, the technology has seen significant adoption across decentralized finance markets, having facilitated over US$2 trillion in lending activity in 2024 on Ethereum-Virtual-Machine-compatible (EVM-compatible) blockchains. Despite their high levels of adoption, flash loans are not well understood by academics and central bank researchers. I provide a detailed description of flash loans, document their usage across major EVM-compatible blockchains, present key findings from the data, and provide the necessary background and context to motivate further research on the topic. Key results show that flash loans expand access to liquidity and are used by highly sophisticated actors for many practical applications.