4 ms·

It's a single atomic database transaction. The borrowing is for 0 second so almost virtual. It's exactly what flashbots are meant for. If you would ask ChatGP

by hbbio 3y ago

It's a single atomic database transaction. The borrowing is for 0 second so almost virtual. It's exactly what flashbots are meant for. If you would ask ChatGPT to earn money trading, it definitely would do this... especially if this pattern is repeatable.

lxgr 3y ago
Interestingly, the interest rate charged seems to be 0.09% [1]. That's infinity percent when annualized! Either I'm missing something, or this specific implementation isn't priced correctly/rationally – competition should drive the rate for this down to exactly zero (no risk because there is no chance of losing money; no opportunity cost because the "lending" party loses use of their capital for zero units of time). In fact, some other blockchains/smart contracts do seem to price this capability at 0% [2]. [1] https://docs.aave.com/developers/v/2.0/guides/flash-loans https://docs.aave.com/developers/v/2.0/guides/flash-loans [2] https://developers.stellar.org/docs/encyclopedia/path-payments https://developers.stellar.org/docs/encyclopedia/path-paymen...
- aleksiy123 3y ago
  Is there actually no opportunity cost? Do the funds not have to be available at the time of the transaction? They may never leave your account but they still need to be there no?
  - lxgr 3y ago
    Theoretically, the funds don't need to "exist": They're a fictional quantity; a scribble in the margin of an intermediate calculation, never to be committed to any ledger. Practically, I suppose that many smart contracts or blockchains don't see things that way and really do require the funds to be available in some account (that also consents to them being used in this way) to keep existing systems and protocols happy. I'd still argue that the marginal interest here should be zero or very close to it, in an efficient market (due to the time being infinitely short) – so seeing quotes of 0.09% of interest for flash loans makes me suspect that there's non-negligible friction somewhere.
aaron695 3y ago
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by hbbio 3y ago

lxgr 3y ago

Interestingly, the interest rate charged seems to be 0.09% [1]. That's infinity percent when annualized! Either I'm missing something, or this specific implementation isn't priced correctly/rationally – competition should drive the rate for this down to exactly zero (no risk because there is no chance of losing money; no opportunity cost because the "lending" party loses use of their capital for zero units of time). In fact, some other blockchains/smart contracts do seem to price this capability at 0% [2]. [1] https://docs.aave.com/developers/v/2.0/guides/flash-loans https://docs.aave.com/developers/v/2.0/guides/flash-loans [2] https://developers.stellar.org/docs/encyclopedia/path-payments https://developers.stellar.org/docs/encyclopedia/path-paymen...

aleksiy123 3y ago
Is there actually no opportunity cost? Do the funds not have to be available at the time of the transaction? They may never leave your account but they still need to be there no?
- lxgr 3y ago
  Theoretically, the funds don't need to "exist": They're a fictional quantity; a scribble in the margin of an intermediate calculation, never to be committed to any ledger. Practically, I suppose that many smart contracts or blockchains don't see things that way and really do require the funds to be available in some account (that also consents to them being used in this way) to keep existing systems and protocols happy. I'd still argue that the marginal interest here should be zero or very close to it, in an efficient market (due to the time being infinitely short) – so seeing quotes of 0.09% of interest for flash loans makes me suspect that there's non-negligible friction somewhere.

aaron695 3y ago

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