Flash Loan
An uncollateralized loan that must be borrowed and repaid within a single atomic blockchain transaction. If the borrower cannot repay the loan plus fees by the end of the transaction, the entire transaction reverts as if it never happened — the blockchain's atomicity guarantee eliminates default risk for the lender. Flash loans enable capital-efficient arbitrage, collateral swaps, and self-liquidation without requiring any upfront capital.
“A trader can flash-borrow $10 million, use it to arbitrage a price discrepancy between two DEXs, repay the loan plus 0.09% fee, and profit $50,000 — all in a single transaction taking a few seconds.”
DeFi (Decentralized Finance)
An ecosystem of financial services built on blockchain networks that operate without traditional intermediaries like banks, brokerages, or insurance companies. DeFi uses smart contracts to provide lending, borrowing, trading, insurance, derivatives, and yield generation in a permissionless, transparent, and composable manner. Anyone with a wallet can participate.
Arbitrage
The practice of profiting from price differences for the same asset across different markets or exchanges. In crypto, arbitrage opportunities arise due to fragmented liquidity across hundreds of exchanges and DEXs. Common forms include exchange arbitrage (same token, different prices), triangular arbitrage (cycling through three trading pairs), and cross-chain arbitrage (same token, different blockchains).
Smart Contract
Self-executing programs stored on a blockchain that automatically enforce the terms of an agreement when predetermined conditions are met. Smart contracts enable trustless transactions without intermediaries because the code, once deployed, executes exactly as written and cannot be altered (unless specifically designed to be upgradeable). They form the foundation of DeFi, NFTs, DAOs, and virtually all dApps.
Sandwich Attack
A form of MEV exploitation where an attacker places two transactions around a victim's pending swap on a DEX — buying the token just before the victim's trade (front-run) to push the price up, then selling immediately after (back-run) once the victim's large order has further increased the price. The victim receives fewer tokens due to the artificially inflated price, and the attacker profits from the price difference.