What Is Flash Loan?

A flash loan is an uncollateralized loan that must be borrowed and repaid within a single blockchain transaction. If the loan isn't repaid by the end of that transaction, the entire transaction reverts and the lender faces zero loss. This mechanism exists because smart contracts can verify repayment instantly on-chain.

For airdrop farmers, flash loans unlock capital amplification strategies without posting collateral. You can borrow large amounts to:

• Boost liquidity pool positions before snapshots. Borrow tokens via Aave or dYdX, deposit into a protocol's LP, then repay the loan in the same transaction. This inflates your TVL position at snapshot time for eligibility or points multipliers.
• Stack multiple yield opportunities in one transaction. Borrow on Uniswap, farm on Compound, then repay—all in seconds.
• Game points programs that reward high transaction volume or liquidity metrics. Flash loans let you simulate large activity without real capital.

Protocols like Aave (most popular flash loan provider), dYdX, and Uniswap V3 offer these loans with small fees (0.05%-0.09% typically). The catch: you need sophisticated knowledge of smart contracts and transaction sequencing, or you'll lose the transaction fee (gas) if your logic breaks.

Why this matters for farming: Flash loans are why snapshot dates matter so much. Sophisticated farmers use them to artificially inflate positions right before eligibility snapshots, then unwind immediately after. This is why many protocols now use historical snapshots or time-weighted average balances instead of point-in-time measurements. Flash loans are also a vector for sybil attacks—one person can borrow massive liquidity and interact with a protocol across fake wallets in one transaction, exploiting eligibility rules.

For new farmers: avoid flash loan strategies unless you understand Solidity and have tested extensively on testnets. Most casual airdrop hunters won't benefit; the gas fees and complexity usually outweigh gains. Focus on legitimate farming instead.