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What Is the Impact of “Flash Loans” on the Stability of Liquidity Pools in DeFi?

Flash loans enable large, instant trades that can cause extreme, temporary price impact and high slippage in DeFi liquidity pools.
Greeks.Live10.11.25

What Is the Impact of “Flash Loans” on the Stability of Liquidity Pools in DeFi?

Flash loans allow users to borrow uncollateralized assets instantly, provided the loan is repaid within the same transaction block. While not directly causing slippage, they enable large-scale, near-riskless arbitrage and manipulation, such as draining a liquidity pool or executing a massive trade that causes extreme, temporary price impact.

This sudden, massive liquidity removal or trade execution can lead to high slippage for other concurrent transactions, challenging the pool's stability.

In What Way Does a High-Frequency Trading (HFT) Environment Affect Slippage?
How Do Flash Loans in DeFi Work and What Are Their Primary Use Cases?
How Does a Flash Loan Potentially Exploit Smart Contract Vulnerabilities?
Define “Price Discovery” and How It Is Impacted by Large, Illiquid Market Orders

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