Flash Loans

UNDERSTANDING FLASH LOANS

A flash loan occurs when a user interacts with a smart contract to obtain, utilize, and repay a loaned digital asset (such as Ethereum, or tokens) within a single transaction block. This is made possible through a self-executing smart contract that has the terms of the loan agreement written directly into the code. Three examples of how this works, are:

• Scenario 1: Arbitrage Opportunities

  A user identifies a price discrepancy between a digital asset on two different decentralized exchanges (DEXs). This grants the user an opportunity to utilize a flash loan to purchase the digital asset at the lower price on one DEX and immediately sell it at the higher price on the other DEX. The profit generated from the arbitrage is used to repay the flash loan, along with a fee, all within a single transaction.

• Scenario 2: Leveraged Yield Farming

  A user wants to increase their yield farming position within a liquidity pool that requires a significant number of tokens as collateral. The user then uses a flash loan of tokens, adds the loaned tokens to their existing liquidity pool position which then boosts their potential rewards. The increased rewards, along with the original loaned tokens, are used to repay the flash loan within the same transaction.

• Scenario 3: Token Swapping and Yield Farming

  A user wants to swap their ETH for NAVRAS tokens to participate in a high-yield farming pool, but does not possess enough ETH to swap for the desired amount of NAVRAS. The user takes out a flash loan of ETH, swaps the loaned ETH for NAVRAS tokens, and deposits them into the yield farming pool. The increased yield farming rewards, along with the additional ETH, are used to repay the flash loan within the same transaction.

BENEFITS TO THE NAVRAS TECH COMMUNITY

The introduction of flash loan utilities adds another layer of functionality to the NAVRAS token, unlocking new potential as a versatile digital asset and driving the growth ecosystem. It empowers holders by providing access to new trading strategies, optimizing yield farming, and driving further innovation within the DeFi landscape.

• New Market Strategies: Flash loans allow users the ability to implement and execute new and complex trading strategies, leading to potential opportunities to amplify their positions, yields, or holdings.

• Asset Capital Efficiency: By borrowing digital assets through flash loans, users can access opportunities to participate in multiple yield farming pools simultaneous, improving the efficiency of their holdings.

• Decentralized Finance Innovation: Flash loan platforms can be utilized to build new DeFi applications including (but not limited to) innovations in decentralized exchanges, lending protocols, and derivatives platforms.

• Community-Driven Development: The can propose and implement new DeFi protocols and use cases built on the NAVRAS platform.

• Inclusion: Flash loans enable opportunities to provide access to digital assets for individuals who may not have traditional options available to them. This contributes to the NAVRAS Tech community by lowering barriers to entry, making it more accessible to a wider range of individuals including empowering individuals in underserved communities.