A flash loan is a DeFi loan that can be easily processed, acquired, and repaid within a short span without the need for any collateral. Aave platform introduced the idea of flash loans while recording the lending data in the Ethereum blockchain.
Flash loan doesn’t offer any delay between the borrow and repayment of the loan amount, since everything happens synchronously. Atomic composability is used to flash loans so that they are either operational to settle or fail at any given time.
One of the best features of a flash loan is the lack of any collateral to back up the loan. Without the involvement of any credit, it mitigates any counterparty risk. This makes flash loans extremely capital-efficient while offering higher leverage.