> Decentralised lending platforms where borrowers can get uncollateralised loans DO NOT exist. The technology does not allow it. There are no mechanisms through which make the borrower repay the loan.
They do exist, Aave allows for this, there is no one to approve the flash loan. Just that you can only borrow the funds for specific context that I described and the borrower will have to pay off the loan or the loan wont be made and will fail. You can't do this at all in tradfi.
> They're conventional loan agreements that are enforced by courts of justice.
And even if these happen traditionally, no defi involved, the borrower many not be able to pay of the loan. Risk will be eaten by someone. Courts of justice can't squeeze blood from stone. But Aave doesn't face this risk. Maybe other protocols will, but thats the risk people have to accept when they engage with the different protocols.
As a curiosity, a "flash loan" is a loan in which the principal is received and repaid simultaneously and therefore has little practical utility, other than facilitating wash trading and other forms of market manipulation, which are prohibited in regulated markets.
I guess there's those like yourself that would deem it of little practical utility for anyone to borrow permissionlessly and without a large pool a capital of their own to take advantage of arb opportunities that arise in markets (and make those markets more efficient for those that use it). Luckily, defi participants are not bounded by your opinions.
It's unclear whether these flash loans can even be used to exploit arbitrage opportunities. Arbitrage involves simultaneous transactions in different markets, whereas flash loans only allow simultaneous transactions in the same blockchain. Anyway, arbitrage is not a sufficient condition for market efficiency. There's plenty of evidence showing that crypto-markets are rife with fraud and are anything but efficient.
They do exist, Aave allows for this, there is no one to approve the flash loan. Just that you can only borrow the funds for specific context that I described and the borrower will have to pay off the loan or the loan wont be made and will fail. You can't do this at all in tradfi.
> They're conventional loan agreements that are enforced by courts of justice.
And even if these happen traditionally, no defi involved, the borrower many not be able to pay of the loan. Risk will be eaten by someone. Courts of justice can't squeeze blood from stone. But Aave doesn't face this risk. Maybe other protocols will, but thats the risk people have to accept when they engage with the different protocols.