📖 Understanding Flash Loans in eBTC

In the world of DeFi, flash loans emerge as a revolutionary tool, allowing users to borrow funds without the need for collateral, provided they are repaid within the same transaction block. These transactions, facilitated by smart contracts on blockchain platforms, are pivotal for executing swift short-term trading strategies or capitalizing on lucrative arbitrage opportunities. Notably, eBTC extends this capability to both eBTC and stETH collateral.

At its core, a flash loan empowers borrowers to access funds without the need for collateral, with repayment required within the same transaction block. Enabled by blockchain-based smart contracts, flash loans revolutionize liquidity provision by eliminating the necessity for borrowers to provide their own collateral. While widely utilized for rapid arbitrage or short-term trading ventures, it's imperative to note that they entail inherent risks, demanding expertise from developers or traders.

Within the eBTC protocol, users can leverage flash loans to access both eBTC and stETH collateral. When engaging in eBTC flash borrowing, debt is minted, transferred, and subsequently burned off upon repayment within the same block, with borrowing amounts capped at uint112.max (2^112 - 1) wei. Similarly, stETH flash borrowing involves withdrawing the desired amount from the collateral pool contract, transferring it to the user, and returning it to the pool upon loan repayment, limited by the pool's available collateral.

While flash loans offer unparalleled liquidity access, users should be aware of associated fees. Those opting for flash loans within the eBTC ecosystem are subject to a 0.03% fee on the borrowed amount. This fee, though subject to potential adjustments through minimized governance, serves as a nominal expense for the convenience and efficiency offered by flash loan functionality.