Flashloan Module

Explaining the Flashloan Module

Flash loans (also called One Block Borrows) are special transactions that allow the borrowing of an asset, as long as the borrowed amount (and a fee) is returned before the end of the transaction. These transactions do not require a user to supply collateral prior to engaging in the transaction. The innovation is that stablecoins given out in flash loans are minted during the flash-loan transaction and burnt at the end of it: this means that the size of the flash loans taken is not capped by an amount of liquidity in a pool but rather by a parameter chosen by governance.

Like done elsewhere, flash-loan transactions are only valid when the amount borrowed by the address taking the flash-loan is returned plus a fee (governance could vote to set no fees) at the end of the transaction. There could also be a cap on the size of the flash-loan taken.

Flash loans of Parallel stablecoins may serve different use cases like arbitrage between assets without needing the principal amount to execute the arbitrage. Overall, it improves the general market efficiency for Parallel stablecoins.

Flash Loans Explained

Parallel introduces for each stablecoin different parameters defining the fees that can be taken at each flash-loan and the maximum size allowed for a flash-loan. These parameters can be modified by governance votes.