# Flash Loans ## Overview While the consolidated liquidity in the Vault does not improve price impact on a per-pool basis, but it does enable Balancer Protocol to leverage that combined liquidity by offering Flash Loans. Flash Loans, [originally created by Aave](https://aave.com/flash-loans/), are uncollateralized loans that must be repaid (plus interest) in the same transaction as they is borrowed. If a strategy is unable to repay the loan, the entire transaction is reverted, returning all borrowed tokens to the Vault. ## Workflow What does a sample Flash Loan transaction look like? ### 1. Take out a loan Borrow X amount of DAI, up to the total amount of DAI available in the Vault. ### 2. Do something Any maneuver that can be profitable within the span of a single transaction is worth performing with a flash loan. Two of the most common flash loan use cases are **arbitrage** and **collateral swap**: **Arbitrage Trade** * Trade DAI for TokenA on one DEX * Trade TokenA for DAI on another DEX **Collateral Swap** * Pay off DAI loan for collateral * Trade collateral for TokenA * Take out another DAI loan with TokenA as collateral ### 3. Repay the loan Check if `final_amount >= X * (1 + interest_rate)` * If successful, repay `X * (1 + interest_rate)` of DAI and keep profit (if any) * If unsuccessful, revert transaction and lose gas fee ## Flash Swaps Further, anyone who identifies a price discrepancy in two Balancer Pools can execute a **Flash Swap**. An arbitrageur who makes a flash swap does not need to hold any of the input tokens that one would normally need to make a trade. Instead, the trader identifies the imbalance, tells the Vault to make the swap, and is rewarded with the profit. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://balancer.gitbook.io/balancer-v2/products/the-vault/flash-loans.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.