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What is a Flash Loan Arbitrage Bot?

    • 7 posts
    July 31, 2025 9:22 AM EDT

    A flash loan is an uncollateralized loan provided using DeFi protocols such as Aave or DyDx. It enables users to borrow huge amounts of cryptocurrency immediately; but, the full transaction (borrow, use, and refund) must take place within a single blockchain transaction. If the loan is not repaid immediately, the entire transaction fails.

     

    How the Flash Loan Arbitrage Bot Work

     

    1. Price Scan: The bot continually checks prices across several DEXs (including Uniswap, SushiSwap, and Balancer).

     

    1. Identifying opportunities: Flash loan bot recognises when an asset's price falls on one exchange and rises on another.

     

    1. Flash Loan Execution: The bot obtains funds (such as ETH) using a flash loan.

     

    1. Buy low and sell high:
    • Purchases the underpriced token on DEX A.
    • Sells it for a greater price on DEX B.

     

    5.Loan repayment: In a single transaction, the profit is used to pay back the flash loan.

     

    1. Profit Capture: If completed successfully, the bot retains the price difference as pure profit.