Undercollateralized Loans

Undercollateralized DeFi loans, also known as "uncollateralized" or "flash" loans, are a type of loan in the decentralized finance (DeFi) ecosystem that do not require the borrower to provide collateral. Instead, the smart contract governing the lending protocol secured the loan. The way they work is that the borrower can borrow a certain amount of a specific cryptocurrency, like Ethereum, for a very short period, usually one block or less. The borrower is then required to repay the loan, plus…