Flash loan
In short A flash loan is an uncollateralized DeFi loan that must be borrowed and repaid within a single transaction, or the whole transaction is reversed.
A flash loan is a loan from a DeFi lending pool that needs no collateral, with one condition: the borrowed amount plus a small fee must be repaid before the transaction ends. If it isn't, the entire transaction reverts as if it never happened. The lender takes no credit risk, because the loan only exists inside that one atomic transaction.
Mechanically, a smart contract asks the pool for funds, receives them, runs whatever logic it wants, and sends the principal and fee back, all in a single block. The pool checks its balance at the end and cancels everything if the money is short. The borrower pays the fee and gas when it works, and still pays gas if it fails.
Legitimate uses are mostly technical. Traders use flash loans for arbitrage between exchanges, for swapping the collateral behind a loan without closing it, or for repaying debt to avoid liquidation. The appeal is that a small trader can temporarily act with millions in capital.
For token buyers and holders, the relevance is on the attack side. An attacker borrows a huge amount, uses it to push a price in a thin liquidity pool, then exploits any protocol that trusts that price, and repays the loan in the same transaction. A flash loan doesn't create the bug; it supplies the capital to exploit one. Early DeFi lending protocols were hit this way in 2020, and small tokens with shallow liquidity are the easiest to move. The same trick can be used to borrow governance tokens and push through a vote within a single block.
Things worth checking: whether a project's contracts take prices from a single pool's spot price or from a manipulation-resistant oracle, such as a time-weighted average. Look for an audit that covers price manipulation and governance, and check that voting power is based on past snapshots rather than current balances. On a block explorer, one transaction that moves a price massively and then reverses is the typical footprint. None of this makes a project safe, but one relying on a raw spot price in a shallow pool is carrying a known risk.