Flash loans are loans that can be taken by anyone without having to put out any collateral. It is possible to make such a transaction because everything is repaid in the same block.

The entire process is executed by a smart contract. If the smart contract detects that the loan will not be fully repaid in the same block, the transaction will be rejected.

Platforms that allow the usage of flash loans usually charge a fee - for Bentobox it is 0.05%.

Flash loans are particularly useful for arbitrage and liquidations. It is very capital efficient as bots and users do not need to have high amount of idle funds in their wallets to execute the trade.