Flash loan is just money that an Ethereum contract gives to a contract given in a callback function and expects the money back inside the same transaction with an interest. It's the first loan with no counterparty risk.
While I'm not a fan of how the Ethereum project and ETH token is managed, Solidity programming language brought real financancial innovations in trustless contracts.
> While I'm not a fan of how the Ethereum project and ETH token is managed
There is a real possibility of BTC finding home on Ethereum network in future. Recent advancements in cryptography make building of fully trust-less bridge between two possible, without requiring any changes on Bitcoin side. So possibility will be there. As for the need - there is no indication of Bitcoin moving towards solving time-bandit attacks. They will become a real issue once block reward falls. I'm skeptical that Bitcoin as a project is even capable of solving this problem. It would require additional emission of BTC, and "21M BTC meme" is way too strong.
I've been researching flash loans for a whole year and its still clear to me that some market participants have a better way of analyzing all markets (the contract state of smart contracts hosting markets) than I do. I feel like they also image the current state of the network and execute variations on Ganache/localhost before sending it on the live network.
Furucombo is the only thing I'm aware of that only partially helps in the structuring of flash loans, but even then using their contract is too expensive.
Over the past year I've built oracles and deployed fleets of complex smart contracts, learning about many areas of improvement in smart contract land and seeing a lot of vulnerabilities in other team's contracts, but as far as actually doing anything with that I'm still very far off.
I'm far from an expert on this, you probably know better than I do, but wouldn't forking the blockchain at the block height you're interested in with Ganache and execute it there be enough? or is the issue the transaction queue?
It gets even funnier when you consider that miners may reorder transactions they include in a block as they see fit, and even add their own transactions to front-run others.
What is the objection? Fees are designed to entice miners to include a transaction. If a fee is too low, the miner will include transactions with better incentives. Recording transactions has real economic cost (mining and permanent storage on the distributed ledger).
Recently miners started exploiting this possibility for profit. This is a problem in many ways, and this problem is hard to solve. Possible solution involves splitting miner role into two - one group will do sequencing (without knowing much about txes contents), other will do application of txes to the state managed by the chain. There are more radical ways of solving the problem - for instance one can hide all the execution from miners. One example would be ZEXE: https://par.nsf.gov/servlets/purl/10175111
Crypto was great at feeling superior than the financial world when BTC was simple and pure. Now we have earning interest, rehypothetication, DeFi and a whole lot of weird stuff that no one understands. Plus its still useless for actually buying things.
Most of the issues with complex financial products leading to the 2008 Global Financial Crisis was the lack of pricing and provenance.
People did not know who owns what, what the underlying assets were, and what the prices were.
In a system where all states are visible and the prior states unchangeable, these cease to be issues, allowing for many of those complex products to exist very easily, which is exactly what is happening and has happened.
If you don't trust that, there is also smart contract insurance you can buy for when smart contracts and oracles create results outside the bounds of the community understanding.
This doesn't mean there won't be problems, an insurance smart contract recently got hacked, it is prudent to recognize that the solutions are presented and the market is choosing those solutions. You should be in the place to laugh about it and know what specific issue occurred and know how you can improve that, as opposed to simply waiting for me to finish so you can play devil's advocate on a mere concept of "crypto" because you might be stuck in the wrong decade since we're way past that.
I'm okay with the rapid iteration towards stronger more robust systems.
The permissionless nature is driving that rapid iteration. Unlike the outsiders in "The Big Short", you don't even need an ISDA Master Agreement to trade these esoteric products. And the flash loan market is very similar to the Federal Reserve's overnight repo market, you don't have to be a big bank. In the repo market, the Fed creates and destroys hundreds of billions of dollars for minute long trades on request, allowing banks to complete deals without needing the cash themselves. This is very onbrand to what "crypto" aspired to do, lower barriers of entry. The permissionless nature is specifically that it doesn't require your opinion or any gatekeeper in order to offer something to the market.
I feel the opposite: defi has been shaping up to be seriously useful. There's still a lot of kinks to work out and while I don't see it replacing tradfin systems, the next 5-10 years look very bright!
We will have some crypto winters in the meantime, but the trajectory is undoubtedly going upwards.
I first became aware of BTC around 2011, bought some around 2013. I didn't really use it for buying anything at all tbh, but it still felt fun - there was a playful, toy like element to it (for me).
Since then, the institutionalization + litany of new crypto to generate wealth for their originators has really soured that feeling for me.
Maybe BTC succeeded at providing people with free (as in freedom) money, so some of it is inevitably going to all sorts of unregulated uncensorable trading games.
Does anyone have a good book, or resource to actually understand this stuff? Seems like the information is spread across many different projects and every book i buy focuses on blockchain development.
What do flash loans do that normal leverage doesn't? Am I correct in wondering whether this allows the unskilled or unlucky trader to ruin themselves a little more quickly?
If the transaction doesn't immediately (within the same block) result in enough profit to pay back the loan with interest, the loan is canceled altogether, i.e. basically it doesn't even happen. Then you only pay some gas fees for executing the smart contracts up to that point (which can be a few hundred bucks nowadays, I must say).
There's many solutions coming online this year. Polkadot is launching a parachain where you can execute your eth contracts using the polkadot network. Also many L2 solutions will solve the problem as it is just a problem of 'Compute'. The transactions gain some 'Centralization' but that doesn't seem to matter in the industry anymore. It's more about being 'Censorship resistant'.
[+] [-] xiphias2|5 years ago|reply
While I'm not a fan of how the Ethereum project and ETH token is managed, Solidity programming language brought real financancial innovations in trustless contracts.
[+] [-] exo762|5 years ago|reply
There is a real possibility of BTC finding home on Ethereum network in future. Recent advancements in cryptography make building of fully trust-less bridge between two possible, without requiring any changes on Bitcoin side. So possibility will be there. As for the need - there is no indication of Bitcoin moving towards solving time-bandit attacks. They will become a real issue once block reward falls. I'm skeptical that Bitcoin as a project is even capable of solving this problem. It would require additional emission of BTC, and "21M BTC meme" is way too strong.
[+] [-] thepangolino|5 years ago|reply
[+] [-] vmception|5 years ago|reply
I've been researching flash loans for a whole year and its still clear to me that some market participants have a better way of analyzing all markets (the contract state of smart contracts hosting markets) than I do. I feel like they also image the current state of the network and execute variations on Ganache/localhost before sending it on the live network.
Furucombo is the only thing I'm aware of that only partially helps in the structuring of flash loans, but even then using their contract is too expensive.
Over the past year I've built oracles and deployed fleets of complex smart contracts, learning about many areas of improvement in smart contract land and seeing a lot of vulnerabilities in other team's contracts, but as far as actually doing anything with that I'm still very far off.
[+] [-] feelix|5 years ago|reply
[+] [-] bondarchuk|5 years ago|reply
https://arxiv.org/abs/1904.05234
[+] [-] optimiz3|5 years ago|reply
[+] [-] exo762|5 years ago|reply
[+] [-] u678u|5 years ago|reply
[+] [-] vmception|5 years ago|reply
People did not know who owns what, what the underlying assets were, and what the prices were.
In a system where all states are visible and the prior states unchangeable, these cease to be issues, allowing for many of those complex products to exist very easily, which is exactly what is happening and has happened.
If you don't trust that, there is also smart contract insurance you can buy for when smart contracts and oracles create results outside the bounds of the community understanding.
This doesn't mean there won't be problems, an insurance smart contract recently got hacked, it is prudent to recognize that the solutions are presented and the market is choosing those solutions. You should be in the place to laugh about it and know what specific issue occurred and know how you can improve that, as opposed to simply waiting for me to finish so you can play devil's advocate on a mere concept of "crypto" because you might be stuck in the wrong decade since we're way past that.
I'm okay with the rapid iteration towards stronger more robust systems.
The permissionless nature is driving that rapid iteration. Unlike the outsiders in "The Big Short", you don't even need an ISDA Master Agreement to trade these esoteric products. And the flash loan market is very similar to the Federal Reserve's overnight repo market, you don't have to be a big bank. In the repo market, the Fed creates and destroys hundreds of billions of dollars for minute long trades on request, allowing banks to complete deals without needing the cash themselves. This is very onbrand to what "crypto" aspired to do, lower barriers of entry. The permissionless nature is specifically that it doesn't require your opinion or any gatekeeper in order to offer something to the market.
[+] [-] smabie|5 years ago|reply
We will have some crypto winters in the meantime, but the trajectory is undoubtedly going upwards.
[+] [-] sgpl|5 years ago|reply
Since then, the institutionalization + litany of new crypto to generate wealth for their originators has really soured that feeling for me.
[+] [-] agumonkey|5 years ago|reply
That said I still thing it's gonna be a chunk of the future of human civilization somehow.
[+] [-] pixel_tracing|5 years ago|reply
[+] [-] oleganza|5 years ago|reply
[+] [-] RhodoGSA|5 years ago|reply
[+] [-] ISL|5 years ago|reply
[+] [-] bondarchuk|5 years ago|reply
[+] [-] jonmaim|5 years ago|reply
[+] [-] haspoken|5 years ago|reply
[+] [-] devops000|5 years ago|reply
[+] [-] hanniabu|5 years ago|reply
[+] [-] RhodoGSA|5 years ago|reply
[+] [-] thewelder|5 years ago|reply
[1] - https://cryptofees.info/
[+] [-] partingshots|5 years ago|reply