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How Does Flash Loans Work in Polygon and Ethereum Using Furucombo Without Coding Skills

By Charles Gune | cryptoguru | 12 Aug 2022

Ever wondered how those hackers make a fortune with flash loans. I will show you how to Create Flash loans in Polygon and Ethereum legally using a tool called Furucombo without the need for Coding Solidity.

AAVE provides flashloans. With Flashloans, no capital is needed to execute a liquidation, borrow funds from Aave, pay back the debt on behalf of the borrower, collect their deposit, trade it for the best available price on and return the assets to Aave with a small fee all in a single transaction. The remaining assets are yours to keep! It is even possible to use Flash Loans without coding skills through user interfaces as the one provided by furucombo. I will provide a FURUCOMBO flashloan tutorial below. Flash loans can be used for Self-Hedging for reckless traders, prevent self liquidation, Arbitrage, Debt refinancing — ‘Interest Rate Swap’, and Debt refinancing — ‘Currency Swap’. Currently FURUCOMBO does support Polygon chain as well as Ethereum.

Using Furucombo you can do following:

Arbitrage trades
Collateral swap
Debt Interest rate swap
Debt Currency swap

In order to find Arbitrage opportunity, you can relies on Coinmarketcap for finding price mismatches between different exchanges. Please keep in mind that Furucombo does NOT find arbitrage opportunities for you. You will have to find it yourself.
One of the most profitable flashloans pairs are WETH to APE. WETH to APE WETH more profitable.

Go to Furucomb. Add Flashloan cube. Pick your starting lending token like WETH. Click Set. This will create Flashloan borrow and payback blocks. Select the WETH as flash loan initiating token. Set the amount as 100 WETH. Click Set. Now you can add the in between step of borrowing and paying off the flashloan. In this case I used Furucomb on Ethereum chain it has more number of tools availiable than the Polygon example I will show you later. In Ethereum there is support for Paraswap, Quickswap, Sushiswap, Curve, Uniswap v2, Uniswap V3, Yearn Finance, Compound, Maker, 1Inch, B Protocol, Synthetix, and obviously AAVE. I use Paraswap to Swap out WETH into APE token. Click previous output. Click Set. Drag and drop this above the AAVE payoff flash loan block. Next, I added 1Inch Swap of APE to WETH. I clicked Previous amount. and Click Set. This will create a 1Inch block. By default newly created blocks come at the very end. You need to drag this before the AAVE payoff block. As you can see in the final setup I have will have a loss of 1.5294 WETH after I pay off the 100 WETH from AAVE flash loan. This is not a profitable Flashloan setup. If you have a profit it will show up on the initial funds section.

Next, I will show you how to do this in Polygon. Only difference in polygon chain is that there are less Furucombo blocks available. There is support for Paraswap, Quickswap, Sushiswap, Curve, Uniswap V3, and obviously AAVE.

Collateral Swap
All DeFi lending protocols are now allowing multi-collateral deposits. In highly fluctuating markets, some assets might be more bullish than others, so why not simply swap collateral to keep a trading position and add a passive “long” by holding another asset as collateral? If the new asset used as a deposit overperforms the original one it leads to higher profits.

Before Flash Loans, we would have to pay back the opened loan, swap collateral, and re-open a loan, requiring many transactions to “wind down” the debt if you don’t have a lot of capital at hand to execute the operation.

With Aave, the process is instant as explained as :
1) borrow ETH on AAVE without collateral
2) Swap for ETH for BAT on Uniswap
3) Deposit BAT collateral on MakerDAO
4) Withdraw ETH collateral on MakerDAO
5) Payback ETH loan on AAVE

This Collateral swap on makerDAO can similarly executed on Compound or DyDx.

A Borrower willing to take risks in leveraging long, just like the legendary CDP 3228, can decide to use Aave to hedge their risk by building a flash loan script to wind down a debt position

1) borrow some DAI from Aave
2) pay back part of their debt
3) withdraw some ETH
4) convert it to DAI with or
5) payback Aave

All of this in a single and almost instant transaction!

Self Liquidation
In the DeFi ecosystem, the liquidations penalties for loans are currently in a range of 3 to 15% depending on the platform, a pretty high price on multi-million $ positions. By leveraging Flashloans, services allowing self-liquidation can be built. If you have a position open and are not near the devices needed to access your funds, simple market events (that are not very rare in our highly fluctuating markets) can trigger a liquidation. To avoid that, a simple script to self-liquidate your loans can use flash loans and your own deposit to pay it back. Flash loans are not free, but it’s much better to pay a 0,09% fee than a 15% liquidation penalty right?

Debt refinancing — ‘Interest Rate Swap’
Aave Protocol and Flash Loans are used to refinance debt to a lower possible interest rate in another lending protocol.
Flashloans can be used to :

1 Borrow Asset from Aave liquidity
2 payback debt on Compound
3 withdraw collateral from Compound
4 deposit collateral on Dydx
5 mint debt on Dydx
6 return liquidity to Aave

All of that in a single transaction.

Debt Refinancing — ‘Currency Swap’
This can be extended to swapping the rate to another currency where the rate is even lower either temporary or for the whole loan period by adding an additional transaction for the Flash Loan circuit where the current borrow currency is sold to another one:

1 User has a Compound loan with 8% on Dai borrow
2 Dai is borrowed as a Flash Loan from Aave
3 Compound borrow is closed and ETH is unlocked from the collateral
4 ETH is sent to DyDx where the there might be 5% on USDC
5 USDC is borrowed from DyDx
6 USDC is sent to UniSwap or Paraswap and converted back to Dai
7 Dai Flash Loan is repaid to Aave

The result is that the borrower refinanced the loan from 8% Dai to 5% USDC without returning the Dai loan. This function could be even extended to work algorithmically by rebalancing to a rate that is always the lowest stablecoin rate. Additionally, a function could be added where the borrower could repay the loan with any stablecoin to close the borrower’s position (stablecoins are sent to UniSwap or Paraswap and converted to borrow currency and repaid).

Risks & Rewards

In conclusion, AAVE flash loan is supported by Polygon and Ethereum chains. For Fantom you can use Cream Finance as flash loan provider. Cream Finance provide flash loan support for For Binance Smart, Arbitrum, Polygon and of course Ethereum. Using Cream Flash Loans you interact with CToken contract, instead of the lending pool. Flash Loan fee is 0.03%. You can also use for Binance Smart Chain flash loan provider as Pancakeswap. For Avalaunch chains flash loan provider is V-Cred Avalaunch. When using flash loans, you need to worry about slippage for large orders. Make sure to pick trading pairs with very large liquidity so slippage is very low. Not all markets have flash loans. Biggest effort is used to finding good arbitrage trading pairs for flash loans. Even if they are there, they will not last that long because some other bot will exploit the price difference and arbitrage will be gone. There is also risk of arbitrage where your gas will be used when there is not much price difference to exploit by the arbitrage.  If you get the right Arbitrage opportunity, you could make thousands!

If you enjoy this Furucombo flash loan tutorial please subscribe and hit the tip button help this channel out and keep you notified on next great Defi videos that I come up with. Happy crypto!

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Charles Gune
Charles Gune

I love anything about cryptocurrencies. I am avid follower of cryptocurrencies. I follow trends on crypto. I am small scale cryptocurrency miner with my private farm.


Interesting topics on Cryptocurrency. Gears toward learning to earning Sats from Cryptocurrencies.

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