> But the only legitimate use of a flash loan is to do some arbitrage - and there’s plenty of that in existing financial systems. There are two main difference

> But the only legitimate use of a flash loan is to do some arbitrage - and there’s plenty of that in existing financial systems. There are two main differences: 1) The atomic nature of a flash loan makes flash loan arbitrage much less risky than performing arbitrage traditionally. Doing the same type of arbitrage non-atomically may mean that you miss the arbitrage opportunity, resulting in a loss from having to pay back the loan you took out plus interest without having made any money with it. 2) Because the debt must be repaid in the same transaction, the loan is uncollateralized. As far as I know, one cannot borrow millions of dollars in the traditional financial system without putting up some kind of collateral. > What a sensible attacker should do is: 1) watch for flash loan transactions to be submitted by someone, then 2) quickly submit a duplicate transaction with a larger fee, but change the destination wallets to your own. This has been observed on the blockchain in practice. The paper I linked to describes the mechanics of how this plays out and what strategies competing arbitrageurs use to win these opportunities.