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Comment by lreeves | Hacker News Reader

The loan part is really bizarre to me; how does one borrow 80m without the lender knowing who you are, why would a lender lend 80m without knowing the borrower, and if you're anonymous enough to steal the money from Beanstalk then why would you even pay the loan back? There are so many layers of insanity here.

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The loan is zero-risk for the lender because it's taken out and repaid within the same transaction (sort of like a database transaction). If the borrower fails to repay, the entire transaction fails/reverts and the money is never lent out.

Now, the borrower doesn't only have to put the borrow and repay calls into that one transaction. They can put anything in between, for example interacting with Beanstalk.

I'm not much for regulation of crypto/DeFi in general, but instant lending like this should absolutely, 100% be illegal. It's exclusively useful for exploits and MEV vampirism, and for nothing else.

i'm glad you're not a regulator.

I can get loans on my assets to participate in defi, arbitrage, & and literally cash out my money into a bank account if i so wished. Pretty useful.

You can't cash out flash loans, they need to repaid within the same block. The only legitimate use case seems to be arbitrage/stablecoin stabilization.

This is possible because of a concept called a flash loan. Using a smart contract, you can borrow (without collateral) and the smart contract would reverse the transaction if the money is not repaid. There is a cost to borrowing, but in this case it obviously made sense. Cryptocurrency arbitrage bots were some of the first implementations of flash loans that I know of.

https://www.coindesk.com/learn/2021/02/17/what-is-a-flash-lo...

That's the cool part: everything is part in one transaction, so the lender is paid back instantly with interest.

Zero risk for the lender.

Well not zero . . .

OK, arguably a tiny about of risk from smart contract bugs in the flash loan code (but given the surface area of something like that, and such, it should be VERY small). The is exactly 0 risk from anything else though.

Consider that it was intentionally built to function this way. The only insanity then is the belief by whoever is ultimately liable on Beanstalks end that the this setup won't land them in jail. Who knows maybe this is ruled legal and anybody can launder money in any way they want so long as they oh shucks are too dumb to setup proper contracts.

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