Recent exploits of the Fulcrum protocol have given flash loans a somewhat of a bad name in the community, but the truth is they can be used for far more convenient things than exploits. There’s at least a dozen ideas floating around currently, and we’re very proud to introduce some of them into DeFi Saver.
1-transaction CDP closing powered by flash loans
The idea of one-tx CDP deleveraging (sometimes also called self-liquidation) is that you get to pay back all of your debt with the collateral contained within the CDP, effectively closing the collateralized debt position. This mechanism could be used either as a stop-loss, to prevent the need to continuously unwind one’s position (i.e. Repay) during a downward market trend, or as a way to close the position and collect profits after a bull run, the choice is up to you and the market gods.
The exact steps for closing a CDP with a flash loan are as follows:
- Take out a DAI flash loan equal to current CDP debt
- Pay back DAI CDP debt using that DAI
- Withdraw ETH/BAT from the CDP
- Convert required amount of ETH/BAT using a DEX to DAI for flash loan debt
- Pay back DAI flash loan debt
- Withdraw remaining ETH/BAT to account
