I'm talking about flash loans (thread) 🧵
Financial instruments from the traditional world, such as loans and derivatives, have been encoded as smart contracts and run on the Ethereum decentralized network.
It makes sense that the next big step would be instruments operating on that value, which took so much effort to move on chain.
Most of what we had seen had a clear parallel from the traditional financial world.
That is, until flash loans.
In blockchain terms, as long as you return them *in the same transaction*
Anyone, without any upfront capital, can now participate in (let's say) arbitrage operations in the DeFi scene.
This is the kind of innovation I signed up for.
When anyone can become a whale for an instant, there are basic assumptions that break. Governance is one of them.
Now anyone can become a whale, break the network, and cash out - in a single tx.
@onewayfunction suggested flash-mints, where instead of borrowing, you just print a lot of money as long as you burn it right away.
medium.com/aave/flash-loa…
Yet the beauty of it is that it's not even clear if it was an actual hack, or just someone cleverly composing protocols in unexpected ways.
It's going to be challenging, and it's going to be awesome!!