Flashloans are the new big trend in DeFi.
With absolutely zero assets flashloans allow you to borrow millions of dollars
of ether and ERC20 tokens. If you combine this with an arbitrage strategy
between different decentralize exchanges like Kyber and Uniswap you can
generate a risk-free profit. However flashloans are not easy. If you want to
execute a flashloan you need to: code your own Solidity smart contract, integrate with the smart contracts of a couple of DeFi protocols, and deploy
your smart contracts to mainnnet. If you are not a blockchain developer it's
gonna be a blocker. And even if you are a blockchain developer you might just want
to experiment easily with flashloans without wasting time coding your own
smart contract. What if someone had created an
easy-to-use interface to use flashloans with a custom arbitrage strategy? Well
with Furucombo your dream came true.
Furucombo is a No-Code tool that
allows you to create custom flashloans. And in this video I'm going to show you
how to use it to create your own flashloans and make a ton of risk-free money. But just before I explain you how to create your own No-Code flashloans
be aware that all the No-Code tools you will find are never as powerful and
flexible as flashloans that you code yourself. So if you really want to be
dangerous and become a true flashloan master go register to my free flashloan training where I will teach you how to programmatically create flashloans. Let the demonstration begin! So this is
the website of Furucombo. If you click on start you can start building in your
flashloans. There are three parts: here is where you
specify the funds you initially provide. You don't have to provide anything. You
can start your flashloan with absolutely nothing. Then on the right that's where
you can configure different steps of your flashloan. And on the left you can
see the asset you will receive after the flashloan. Now we have nothing in our
flashloan and we need to manually configure each step.
And before we do
this we need to plan our flashloan. With a flashloan you can do many different
things: swapping your collateral in a DAI vault, liquidating an under-collateralized loan on Compound and get a liquidation reward.. and I could
continue to give you other examples, the possibilities are really endless. But in
our case we are going to focus on arbitrage. The basic idea with arbitrage is to
buy low and sell high. So you find an ERC20 token that has a
lower price on exchange A and a higher price on exchange B. And after that you
just buy the token from exchange A and sell it in exchange B. And if you combine this
with the leverage you get from a flashloan you can make a substantial profit.
So for our example we'll assume that there is a discrepancy in the price of
DAI. So DAI is cheaper on Uniswap compared to Kyber.
So our evil plan is to borrow Ether with the flashloan, buy DAI on Uniswap with
the Ether that was borrowed, sell DAI on Kyber and get our initial ETH plus some
And finally reimburse the loan with the ETH we got back from
Kyber. And now that we have a plan we need to configure the different steps in
the user interface of Furucombo. The first step of our evil plan is to
borrow ETH with a flashloan. This is important because it will
provide a leverage that will make our arbitrage way more powerful. So we click
on the plus sign here and we scroll down and we see this Aave section so this
is cut up on my screen but you will see a flashloan button just below. And here
you can select the currency that you want to borrow. So we're gonna choose
ETH. And, we gonna choose 100 ETH.. Click on set. And we have the two legs of our flashloan. The borrow and the reimbursement. And now we can do whatever we want with
this Ether. How cool is that! And in the next step we are going to use this
Ether to buy DAI on Uniswap. Uniswap is a decentralized exchange for ERC20 tokens.
Anybody can buy or sell ERC20 tokens in a decentralized way using a
smart contract. So we will use their smart contract to buy DAI by using the ETH we
borrowed from our flashloan. So in the interface we're gonna scroll
down and here we're gonna click on the plus sign and in the Uniswap box
we're gonna click on swap token. And we're going to exchange ETH for DAI. So
in output here we selected DAI. And we're gonna specify the input amount for Ether.
So 100 ETH because that's how much we borrowed from the flashloan. And we can see how
much DAI we get as output here. And click on set. And that's it! And after we're
going to re-order Uniswap to put it at the right place between the two legs of
the flashloan. Ok we are done with Uniswap. The next step is to convert the DAI
back to ETH about using Kyber. Kyber like Uniswap is a decentralized
exchange for ERC20 tokens. The wait it work is different from Uniswap but as
traders we don't really care about this.
All we care about is that we can sell our
DAI using their smart contractor. So in Furucombo we scroll down, click on plus to
add a new step and here in Kyberswap click on "swap token". And so this time in
input we have DAI. And in output we will have Ether. And we need to specify the amount of
DAI, and so for that you are going to copy paste the output of Uniswap… put it here…ok and so
that's how much Ether we'll get back. Click on set and after we're going to
re-order this to put it just after Uniswap. So let's make sure that everything
is in the right order. First we borrow money from the flashloan then we have Uniswap…then Kyberswap..
Ok we're good for Kyber. And next step is to reimburse
the Ether that you initially borrowed with the flashloan. All the steps we
configure will happen in the same transaction. But if you don't reimburse
the flashloan the whole transaction is gonna fail. So we do have to reimburse
the flashloan plus a fee that is charged by Aave, the team behind flashloans. So
let's scroll down to the second leg of the flashloan. And we can see that this
is already configured to reimburse the 100 ETH that we initially borrowed.
And after that, when your wallet is connected.. so that's not the case of my wallet
otherwise you can see this button "send" more visible. You click on it, you will see the
pop-up notification of Metamask or of whatever wallet you're using. You confirm
and your flashloan is going to be executed on mainnet. And after that we
have completed our flashloan arbitrage. But how much money did you make?
Well it's time to count your money! Unfortunately there isn't any profit
calculator on Furucombo at the time of recording this video.
So you need to
compute the profit yourself by adding the value of assets returned in output,
subtracting the value of assets provided in input…
that's nothing in our case. And subtracting the Gas costs. So you will see
this in Metamask just before confirming a transaction. So for our example we
actually won't profit at all. We will even loose money and that's because I haven't
spotted an arbitrage opportunity. (and if I did I wouldn't be recording
this video but I would trade it instead) But the point was to create an hypothetical
scenario and give you an example. So flashloans seem amazing but is it
too good to be true? Well like many things in life there are
risks and we're going to talk about that. The first risk you face with a flashloan is slippage.
Slippage means that the more liquidity you tap on an
exchange the worse your average price. And we can see this in action easily on
Furucombo. So if we try to increase our flashloan a lot we can see that we
are getting a very little DAI (oops..I mean ETH) back from Kyber compared to what we initially
invested. Shat's slippage in action. So in order to avoid this you need to limit
the size of the flashloan. So even if in theory you can borrow as much as you
want with flashloans, there is actually a practical limit because of slippage.
The other risk you face is delayed execution.
If the (Ethereum) network is congested
it's possible that your transaction takes too long to execute and when it finally
gets executed the price discrepancy that you initially spotted no longer exists.
In order to avoid this you need to make sure that your gas fees are high enough
especially when the network is congested. So as I said before in this video even
if No-Code tools are super cool, No-code tools are limited. If you want to unlock
the true power of flashloans you need to learn how to code you own flashloans
by using Solidity, the programming language of smart contracts on Ethereum.
Another problem with No-Code tools for flashloans is that they're too slow. You
need to manually spot an arbitrage opportunity and quickly run your Flashloan before the arbitrage opportunity
disappears. But you are competing with other people who do the same thing
programmatically with scripts who scan arbitrage opportunities 24/7 and
executes automatically flashloans super fast, as soon as they detect an
If you want to be competitive you need to do the same
thing. And if you want to learn this and become a true flashloan master
register to my free flashloan training I'll see you there..