tools-only Simulating Flash Loans
Overview
This skill simulates flash loan strategies across major DeFi protocols (Aave V3, dYdX, Balancer) with profitability calculations, gas cost estimation, and risk assessment. It enables developers and researchers to evaluate flash loan opportunities without executing real transactions.
Prerequisites
Before using this skill, ensure you have:
- Python 3.9+ with
web3,httpx, andrichpackages - RPC endpoint access (free public RPCs work fine)
- Understanding of flash loan mechanics and DeFi protocols
- Optional: Etherscan API key for better gas estimates
Instructions
Step 1: Configure RPC Endpoint
Configure your RPC in {baseDir}/config/settings.yaml:
# Free public RPCs (no signup required)
rpc_endpoints:
ethereum: "https://rpc.ankr.com/eth"
polygon: "https://rpc.ankr.com/polygon"
arbitrum: "https://rpc.ankr.com/arbitrum"
Or use environment variable:
export ETH_RPC_URL="https://rpc.ankr.com/eth"
Step 2: Simple Arbitrage Simulation
Simulate a basic two-DEX arbitrage:
python {baseDir}/scripts/flash_simulator.py arbitrage ETH USDC 100 \
--dex-buy uniswap --dex-sell sushiswap
This calculates:
- Gross profit from price difference
- Flash loan fee (provider-specific)
- Gas costs
- Net profit/loss
Step 3: Compare Flash Loan Providers
Find the cheapest provider for your strategy:
python {baseDir}/scripts/flash_simulator.py arbitrage ETH USDC 100 --compare-providers
Output shows:
| Provider | Fee | Net Profit |
|---|---|---|
| dYdX | 0% | $245.30 |
| Balancer | 0.01% | $242.80 |
| Aave V3 | 0.09% | $225.50 |
Step 4: Liquidation Profitability
Analyze liquidation opportunities:
python {baseDir}/scripts/flash_simulator.py liquidation \
--protocol aave --health-factor 0.95
Shows positions below health factor threshold with:
- Collateral value
- Debt value
- Liquidation bonus
- Net profit after costs
Step 5: Triangular Arbitrage
Simulate multi-hop circular arbitrage:
python {baseDir}/scripts/flash_simulator.py triangular \
ETH USDC WBTC ETH --amount 50
Analyzes path profitability:
Path: ETH → USDC → WBTC → ETH
Gross: +0.15 ETH
Fees: -0.045 ETH (3 swaps)
Loan: -0.045 ETH (Aave fee)
Gas: -0.02 ETH
─────────────────────
Net: +0.04 ETH ($101.73)
Step 6: Risk Assessment
Add risk analysis to any simulation:
python {baseDir}/scripts/flash_simulator.py arbitrage ETH USDC 100 --risk-analysis
Risk factors scored:
- MEV Competition: Bot activity on this pair
- Execution Risk: Slippage and timing sensitivity
- Protocol Risk: Smart contract and oracle risks
- Liquidity Risk: Depth available for trade size
Step 7: Full Analysis
Run complete analysis with all features:
python {baseDir}/scripts/flash_simulator.py arbitrage ETH USDC 100 \
--full --output json > simulation.json
Output
The simulator provides:
Quick Mode:
- Net profit/loss
- Provider recommendation
- Go/No-Go verdict
Breakdown Mode:
- Step-by-step transaction flow
- Individual cost components
- Slippage estimates
Comparison Mode:
- All providers ranked
- Fee differences
- Liquidity availability
Risk Analysis:
- Competition score (0-100)
- Execution probability
- Protocol safety rating
- Overall viability grade
Flash Loan Providers
| Provider | Fee | Best For | Chains |
|---|---|---|---|
| dYdX | 0% | Maximum profit | Ethereum |
| Balancer | 0.01% | Pool tokens | ETH, Polygon, Arbitrum |
| Aave V3 | 0.09% | Any token | ETH, Polygon, Arbitrum, Optimism |
| Uniswap V3 | ~0.3% | Specific pairs | ETH, Polygon, Arbitrum |
Supported Strategies
- Simple Arbitrage: Buy on DEX A, sell on DEX B
- Triangular Arbitrage: A→B→C→A circular path
- Liquidation: Repay debt, claim collateral bonus
- Collateral Swap: Replace collateral without closing
- Self-Liquidation: Efficiently close own position
- Debt Refinancing: Move debt to better rates
Error Handling
See {baseDir}/references/errors.md for comprehensive error handling.
Common issues:
- RPC Rate Limit: Switch to backup endpoint or wait
- Stale Prices: Data older than 30s triggers warning
- No Profitable Route: All routes lose money after costs
- Insufficient Liquidity: Trade size exceeds pool depth
Examples
See {baseDir}/references/examples.md for detailed examples including:
- ETH/USDC arbitrage simulation
- Aave liquidation analysis
- Multi-provider comparison
- Historical backtesting
Educational Disclaimer
FOR EDUCATIONAL PURPOSES ONLY
Flash loan strategies involve significant risks:
- Smart contract bugs can cause total loss
- MEV bots compete for same opportunities
- Gas costs can exceed profits
- Protocol exploits may have legal implications
Never deploy unaudited code. Start with testnets. Consult legal counsel.