Can a Flash Loan Be Used for Cross-Exchange (Spatial) Arbitrage? Why or Why Not?
Generally, a single flash loan cannot be used for spatial arbitrage because the entire transaction must be completed within a single blockchain block. Spatial arbitrage requires transactions on two separate exchanges, often on different blockchains or involving time-consuming off-chain transfers, which cannot be completed atomically in one block.
However, a flash loan can be used if both exchanges are on the same blockchain and support atomic multi-contract calls.
Glossar
Transaction Finality
Principle ⎊ Transaction finality is the principle that once a transaction is recorded on a blockchain, it cannot be reversed, altered, or canceled, providing absolute and irreversible settlement assurance.
Spatial Arbitrage
Mechanism ⎊ Spatial arbitrage within cryptocurrency derivatives exploits temporary pricing discrepancies for the same asset across different exchanges or derivative markets, seeking risk-free profit through simultaneous purchase and sale.
Flash Loan
Mechanism ⎊ A flash loan represents an uncollateralized loan executed entirely within a single blockchain transaction, enabling borrowers to access substantial capital for a very short duration, typically seconds.