Flash loan arbitrage is a trading strategy that takes advantage of price disparities in the cryptocurrency market by utilizing flash loans. Unlike traditional loans, flash loans allow traders to borrow a significant amount of capital without requiring any collateral, as long as the borrowed amount is returned within a single transaction block.In this tutorial, we will build a basic Flashloan Arbitrage Smart Contract along with a frontend interface to interact with it.Let's get started!Getting Started&nbsp;This tutorial was developed using scaffold-eth x BuildBear repository, &nbsp;which has now been archived. For updated tutorials, please refer to the <a href="https://github.com/BuildBearLabs/Scaffold-Eth-2-BuildBear">scaffold Eth2 x Buildbear</a> repo. You can find the latest code and instructions in the updated repository.Here's why we recommend using scaffold-eth2 x BuildBear:<ul><li>It allows you to easily fork EVM-compatible chains (such as Ethereum, Polygon, Binance Smart Chain, Fantom, Optimism, and Arbitrum Mainnet) directly from the CLI. Saving you valuable time that would otherwise be spent searching for working RPCs.</li><li>You can mint native and ERC20 tokens effortlessly using the CLI, eliminating the need to waste time searching for functional faucets.</li></ul>To get started, click on the "Fork" button to create a copy of the repository on your own GitHub account. Please wait for the forking process to complete before proceeding.Next, open a terminal and clone the forked repository, which includes all the necessary components for building a decentralized application:<pre><code class="language-plaintext">git clone &lt;paste the URL you fork repo&gt;
cd Scaffold-Eth-2-BuildBear
</code></pre>To install all the required packages, execute the following command:<pre><code class="language-plaintext">yarn install
</code></pre>To execute the Flashloan Arbitrage, we can leverage the existing Aave Protocol and DEXs by forking the Ethereum Mainnet instead of redeploying these protocols.use the following command:<pre><code class="language-plaintext">yarn fork-bb
</code></pre><figure class="image image_resized" style="width:64.38%;"><img src="https://strapi.buildbear.io/uploads/Untitled_074323d928.gif" alt="Untitled.gif"></figure>Deploying the contracts<pre><code class="language-plaintext">yarn deploy
</code></pre><figure class="image image_resized" style="width:67.34%;"><img src="https://strapi.buildbear.io/uploads/Untitled_6a654dfd11.webp" alt="Untitled.webp" srcset="https://strapi.buildbear.io/uploads/thumbnail_Untitled_6a654dfd11.webp 245w,https://strapi.buildbear.io/uploads/small_Untitled_6a654dfd11.webp 500w,https://strapi.buildbear.io/uploads/medium_Untitled_6a654dfd11.webp 750w,https://strapi.buildbear.io/uploads/large_Untitled_6a654dfd11.webp 1000w," sizes="100vw"></figure>🚨&nbsp;If you are using a Node version &lt; v18 you will need to remove&nbsp;<code>openssl-legacy-provider</code>&nbsp;from the&nbsp;<code>start</code>&nbsp;script in&nbsp;<code>package.json</code> Starting the frontend<pre><code class="language-plaintext">yarn start 
</code></pre>Once the application is running, you can access it at <a href="http://localhost:3000">http://localhost:3000</a> and you should see the following:<figure class="image image_resized" style="width:50%;"><img src="https://strapi.buildbear.io/uploads/Screenshot_from_2024_04_01_09_55_26_4daff5f007.png" alt="Screenshot from 2024-04-01 09-55-26.png" srcset="https://strapi.buildbear.io/uploads/thumbnail_Screenshot_from_2024_04_01_09_55_26_4daff5f007.png 245w,https://strapi.buildbear.io/uploads/small_Screenshot_from_2024_04_01_09_55_26_4daff5f007.png 500w,https://strapi.buildbear.io/uploads/medium_Screenshot_from_2024_04_01_09_55_26_4daff5f007.png 750w,https://strapi.buildbear.io/uploads/large_Screenshot_from_2024_04_01_09_55_26_4daff5f007.png 1000w," sizes="100vw"></figure>Before diving deeper into the smart contract, let's start by exploring the functionalities of the Flashloan Arbitrage Bot. To begin, navigate to the Flashloan+Arbitrage page.<figure class="image image_resized" style="width:50%;"><img src="https://strapi.buildbear.io/uploads/Screenshot_from_2024_04_01_10_08_04_5014c47d2d.png" alt="Screenshot from 2024-04-01 10-08-04.png" srcset="https://strapi.buildbear.io/uploads/thumbnail_Screenshot_from_2024_04_01_10_08_04_5014c47d2d.png 245w,https://strapi.buildbear.io/uploads/small_Screenshot_from_2024_04_01_10_08_04_5014c47d2d.png 500w,https://strapi.buildbear.io/uploads/medium_Screenshot_from_2024_04_01_10_08_04_5014c47d2d.png 750w,https://strapi.buildbear.io/uploads/large_Screenshot_from_2024_04_01_10_08_04_5014c47d2d.png 1000w," sizes="100vw"></figure>To claim free ETH, Connect your wallet and Click on grab funds from the faucet.&nbsp;FlashLoan Arbitrage<ul style="list-style-type:disc;"><li>Select the token for the FlashLoan: This token will serve as the borrowed capital for executing the arbitrage trade.</li><li>Select the token for swapping: This token will be involved in the arbitrage transaction to take advantage of price discrepancies.</li><li>Enter the FlashLoan amount: This amount will determine the funds available for executing the arbitrage trade.</li></ul>To withdraw tokens from the Flashloan+Arbitrage Smart Contract<ol><li>Select tokens for withdrawal: the specific tokens to withdraw from the smart contract. These tokens should be available within the contract's holdings.</li></ol>Let's dive deep into the Smart contractWe can find <code>ArbitrageFlashLoan.sol</code> contract in&nbsp;<code>packages/hardhat/contracts</code>:<figure class="image image_resized" style="width:73.43%;"><img src="https://strapi.buildbear.io/uploads/carbon_26_4bda1c0ee9.png" alt="carbon (26).png" srcset="https://strapi.buildbear.io/uploads/thumbnail_carbon_26_4bda1c0ee9.png 140w,https://strapi.buildbear.io/uploads/small_carbon_26_4bda1c0ee9.png 448w,https://strapi.buildbear.io/uploads/medium_carbon_26_4bda1c0ee9.png 672w,https://strapi.buildbear.io/uploads/large_carbon_26_4bda1c0ee9.png 895w," sizes="100vw"></figure><figure class="image image_resized" style="width:73.78%;"><img src="https://strapi.buildbear.io/uploads/carbon_25_0ac2e36918.png" alt="carbon (25).png" srcset="https://strapi.buildbear.io/uploads/thumbnail_carbon_25_0ac2e36918.png 206w,https://strapi.buildbear.io/uploads/small_carbon_25_0ac2e36918.png 500w,https://strapi.buildbear.io/uploads/medium_carbon_25_0ac2e36918.png 750w,https://strapi.buildbear.io/uploads/large_carbon_25_0ac2e36918.png 1000w," sizes="100vw"></figure>Let's break down the key components and functionalities of the contract:<ul style="list-style-type:disc;"><li><code>Contract Imports:</code> The contract imports various external contracts and interfaces that are necessary for its operation, including the FlashLoanReceiverBase.sol, Interfaces.sol, Libraries.sol, and IUniswapV2Router02.sol.</li><li><code>Constant Addresses:</code> The contract defines two constant addresses, <code>UNISWAP_ROUTER_ADDRESS</code> and <code>SUSHISWAP_ROUTER_ADDRESS</code>, which correspond to the Ethereum addresses of the Uniswap and Sushiswap routers, respectively.</li><li><code>Contract Variables:</code> The contract declares several state variables, including the addresses of Uniswap and Sushiswap routers (uniswapRouter and <code>sushiswapRouter</code>), token contracts for the "To" and "From" tokens (To_Token_Contract and From_Token_Contract), addresses for the "From" and "To" tokens (From_Token and To_Token), the lending amount (Lending_Amount), and the contract owner (Owner).</li><li><code>Constructor</code>: The constructor function initializes the contract by setting the addresses of the Uniswap and Sushiswap routers and setting the contract owner to the address of the deployer.</li><li><code>WithdrawToken</code> : The function withdrawToken allows the contract owner to withdraw tokens from the contract to their personal account. It takes the token address as an argument and transfers the token balance from the contract to the owner's address.</li><li><code>Flashloan</code> : The flashloan function is the entry point for initiating a flashloan arbitrage operation. It takes the addresses of the "From" token and the "To" token, as well as the loan amount, as arguments. It sets the necessary variables for the flashloan operation and then triggers the flashLoan function inherited from the FlashLoanReceiverBase contract.</li><li><code>executeOperation</code> : This function is called after the flashloaned amount is received by the contract. It executes the arbitrage trade by swapping tokens using the Uniswap and Sushiswap routers. It first swaps the "From" token for the "To" token using Uniswap, and then swaps the "To" token back to the "From" token using Sushiswap. Additionally, it approves the necessary token amounts for repayment to the lending pool.</li></ul>let’s execute the Flashloan ArbitrageIn order for this Flashloan Arbitrage to work, there has to be a price difference between the assets on Uniswap and SushiSwap. This price difference occurs naturally when a user swaps a large number of tokens from a pool.So, let's perform a large swap to alter the price of DAI/USDC Tokens on Uniswap. Then, we can take advantage of this opportunity to perform Flashloan Arbitrage.To do this, we need a large number of USDC tokens. Let's mint 10,000,000 USDC from the CLI as follows:<figure class="image image_resized" style="width:71.66%;"><img src="https://strapi.buildbear.io/uploads/Untitled_4_d680e3f8ec.png" alt="Untitled 4.png" srcset="https://strapi.buildbear.io/uploads/thumbnail_Untitled_4_d680e3f8ec.png 245w,https://strapi.buildbear.io/uploads/small_Untitled_4_d680e3f8ec.png 500w,https://strapi.buildbear.io/uploads/medium_Untitled_4_d680e3f8ec.png 750w,https://strapi.buildbear.io/uploads/large_Untitled_4_d680e3f8ec.png 1000w," sizes="100vw"></figure>On the swap page, you'll find a swap functionality designed to interact with Uniswap. Select USDC and any other token for which you want to create a price discrepancy (e.g., DAI). Enter the amount of 10,000,000 USDC, approve the USDC tokens, and click on "Swap". The swap will be successful.Because of the large Swap, we have altered the price of USDC/DAI on Uniswap. To verify this, navigate to Explorer by clicking on the Transaction hash links provided below on the Swap component page, search for the <code>UNISWAP_ROUTER</code> Contract address <code>0x7a250d5630B4cF539739dF2C5dAcb4c659F2488D</code> and move to the "read contract" section. Search for the "getAmountOut" function, which will help us determine how many tokens we will receive if we input the token's address to swap and the amount. Enter the Token address DAI <code>0x6B175474E89094C44Da98b954EedeAC495271d0F</code> and USDC <code>0xA0b86991c6218b36c1d19D4a2e9Eb0cE3606eB48</code>, along with the token amount of 100 DAI. Once you have entered the information, click on "Query". The query will display the current exchange rate, which indicates that for 100 DAI, you will receive 149 USDC tokens. Please note that this value may vary based on the conditions of the pool at the time when the chain was forked.<figure class="image image_resized" style="width:55.75%;"><img src="https://strapi.buildbear.io/uploads/Untitled_6_44df0b0334.webp" alt="Untitled 6.webp" srcset="https://strapi.buildbear.io/uploads/thumbnail_Untitled_6_44df0b0334.webp 245w,https://strapi.buildbear.io/uploads/small_Untitled_6_44df0b0334.webp 500w,https://strapi.buildbear.io/uploads/medium_Untitled_6_44df0b0334.webp 750w,https://strapi.buildbear.io/uploads/large_Untitled_6_44df0b0334.webp 1000w," sizes="100vw"></figure>Now that we have a price difference on DAI/USDC on Uniswap, we can use it to execute the Flashloan Arbitrage. Move to the Flashloan Arbitrage section, select the DAI and USDC tokens, enter the desired amount, and click on "Run Flashloan Arbitrage". Wait for the transaction to execute and then click on "View Balance of Contract". If the Flashloan Arbitrage is successful, you will notice an increase in the balance of the contract.<figure class="image image_resized" style="width:23%;"><img src="https://strapi.buildbear.io/uploads/Untitled_7_9097562ba2.png" alt="Untitled 7.png" srcset="https://strapi.buildbear.io/uploads/thumbnail_Untitled_7_9097562ba2.png 161w," sizes="100vw"></figure>Click on "Latest Transaction Hash" to view the Flashloan Arbitrage transaction.<figure class="image image_resized" style="width:59.38%;"><img src="https://strapi.buildbear.io/uploads/Untitled_8_f9306e22c5.png" alt="Untitled 8.png" srcset="https://strapi.buildbear.io/uploads/thumbnail_Untitled_8_f9306e22c5.png 222w,https://strapi.buildbear.io/uploads/small_Untitled_8_f9306e22c5.png 500w,https://strapi.buildbear.io/uploads/medium_Untitled_8_f9306e22c5.png 750w,https://strapi.buildbear.io/uploads/large_Untitled_8_f9306e22c5.png 1000w," sizes="100vw"></figure><figure class="image image_resized" style="width:59.91%;"><img src="https://strapi.buildbear.io/uploads/Untitled_9_558109f546.png" alt="Untitled 9.png" srcset="https://strapi.buildbear.io/uploads/thumbnail_Untitled_9_558109f546.png 225w,https://strapi.buildbear.io/uploads/small_Untitled_9_558109f546.png 500w,https://strapi.buildbear.io/uploads/medium_Untitled_9_558109f546.png 750w,https://strapi.buildbear.io/uploads/large_Untitled_9_558109f546.png 1000w," sizes="100vw"></figure>Let's go through this Token Transfer to understand what exactly occurred:<ul style="list-style-type:disc;"><li>In the first token transfer, we received 1000 DAI from Aave.</li><li>In the second and third steps, we swapped 1000 DAI for 4035 USDC on UniSwap.</li><li>We then utilized the 4035 USDC to swap for 2265 DAI on SushiSwap.</li><li>We paid 1000.9 DAI to Aave and earned 1265 DAI. Note that these tokens hold no value as we are operating on a Testnet.</li></ul>To withdraw tokens from the FlashloanArbitrage contract, you can utilize the "withdraw" function.<figure class="image image_resized" style="width:24.25%;"><img src="https://strapi.buildbear.io/uploads/Untitled_10_2c6a2adb76.png" alt="Untitled 10.png" srcset="https://strapi.buildbear.io/uploads/thumbnail_Untitled_10_2c6a2adb76.png 245w," sizes="100vw"></figure>🎉🎉CongratulationsWe have successfully developed a basic Flashloan Arbitrage contract and executed a Flashloan Arbitrage transaction.If you appreciate what we are doing, please follow us on&nbsp;<a href="https://twitter.com/_BuildBear">Twitter</a>, and&nbsp;<a href="https://www.linkedin.com/company/build-bear/">LinkedIn</a>&nbsp;and&nbsp;<a href="https://t.me/+6mjOnBFUR9xjN2U1">Join the Telegram</a>&nbsp;group if you haven’t done yet.Github Repo :&nbsp; <a href="https://github.com/BuildBearLabs/Scaffold-Eth-2-BuildBear">scaffold Eth2 x Buildbear</a>&nbsp;About BuildBear:BuildBear is a platform for testing dApps at scale, for teams. It provides users with their own private Testnet to test their smart contracts and dApps, which can be forked from any EVM chain. It also provides a Faucet, Explorer, and RPC for testing purposes.<blockquote>BuildBear aims to build an ecosystem of tools for testing dApps at scale for the teams.</blockquote>Check out the projects we build on <a href="https://github.com/BuildBearLabs/Scaffold-Eth-2-BuildBear">scaffold Eth2 x Buildbear</a> and keep learning :<ul style="list-style-type:disc;"><li><a href="https://www.buildbear.io/resources/guides-and-tutorials/Build_Your_Own_Decentralized_Lending_Protocol">Build Your Own Decentralized Lending Protocol</a></li><li><a href="https://www.buildbear.io/resources/guides-and-tutorials/Build_your_own_Decentralized_Exchange">Build your own Decentralized Exchange</a></li></ul>Author: <a href="https://twitter.com/chandan1_">chandan</a>

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Flash loan arbitrage is a trading strategy that takes advantage of price disparities in the cryptocurrency market by utilizing flash loans. Unlike traditional loans, flash loans allow traders to borrow a significant amount of capital without requiring any collateral, as long as the borrowed amount is returned within a single transaction block.

A Comprehensive Step-by-Step Guide for Building a Flashloan Arbitrage Bot

BUILDBEAR // TUTORIALS

A Comprehensive Step-by-Step Guide for Building a Flashloan Arbitrage Bot

Let’s get started then, Shall we?

Let’s get started then, Shall we?

Test DApps at Scale.