What is Flash Swap?
Flash swaps are a type of transaction available on some decentralized exchanges that allow users to borrow assets from a pool without providing collateral, as long as the borrowed assets are returned in the same transaction. This means that the transaction can be executed without requiring the user to have any of the assets being traded.
Here's how a flash swap typically works:
A user initiates a flash swap transaction, specifying the amount of a token they want to borrow.
The transaction is processed if the user also provides a callback function in the transaction that executes a swap, usually in the same transaction.
If the swap is successful and the borrowed tokens are returned to the pool along with any fees, the transaction is considered valid. If not, the transaction fails, and any changes made are reverted.
Flash swaps are powerful tools that can be used for various purposes, such as arbitrage, liquidations, and other complex trading strategies. However, they also come with risks, such as the potential for failed transactions and the need for careful management of borrowed funds.