How to create a passive income app with Flash Loans + AI

One of the craziest things about blockchain is that you can do things that you can't do anywhere else in finance like with flash loans where you can borrow millions of dollars of cryptocurrency for free as long as you pay it back in the same transaction so that you can do things like make passive income. And that's exactly what I'm going to show you how to do in this video today as a blockchain developer myself who works with this technology on a daily basis. So, if you're new around here, hey, I'm Gregory and on this channel I turn you into a blockchain master. So, if that's something you're interested in, then smash that like button down below and subscribe. All right, so let's get into this. So, first of all, what are flash loans? So, I'm guessing you probably have some idea of what they are since you clicked on this video, but basically this is a technique where you can borrow millions of dollars of cryptocurrency for free on the blockchain as long as you pay it back in the same transaction. So, what the heck does that mean? Well, basically the long and short of it is that blockchain support simple transactions and complex transactions. So like a simple transactions like if I'm sending cryptocurrency from my account to yours basically you just click a button in your wallet and that happens. But when you're talking about complex transactions like multiple steps like step one borrow some money, step two do something with it, step three pay it back, step four keep the profit. That's where you actually bring smart contracts into the equation that facilitate this process. And I'll break all that down here in a second. So what can you do with flash loans? Well, there's all different types of things. I mean, one technique is arbitrage crypto trading where essentially you're buying on one crypto exchange and selling on another crypto exchange in real time for a profit and you're just borrowing the money to do this with flash loans. Another way is going to be with like leverage yield farming where you're earning an APY and you're able to actually earn more with cryptocurrency that you don't have. But then a third way that I want to talk about this video is to actually trade crypto. So, as a part of a crypto trading strategy where you can actually trade crypto that you currently don't have. Now, I'm going to show you exactly how that works in this video, but if you want to steal the application that I'm talking about, then make sure you hold your spot for the flash loan master class next Thursday, May 21st. Inside, I'm going to show you everything that you need to know about flash loans and how to do this exact strategy that I'm showing you in this video, and then actually let you steal my flash loan trading app. So, trust me, you don't want to miss this. Hold your spot, the link down below. All right, so let's talk about how would you trade cryptocurrency that you presently don't have. I mean that's where this flash loan idea comes into place about bringing into your trading. Well, people have been borrowing money to trade for a very long time, you know, in the traditional stock market, equities markets, etc., etc. Basically going long or going short, okay, with borrowed funds. All right, so basically this looks like you're betting on the price of an asset going up over time and you're increasing your exposure by with borrowed funds or you're betting on the price going down and you're, you know, borrowing money in order to do this. Now, you can do this with blockchain and DeFi, all right, with flash loans. So, let me just kind of explain a little bit what that means, going long and going short. Because if you're, you know, a coder or you're just not really familiar with all the trading terminology, I want to explain what that looks like. So, let's look at the price of Ethereum cryptocurrency or Ether. And let's say just for round numbers, you know, ETH is worth $2,000 at the time recording this video. Okay? So, let's say that you think that Ether is going to go to $4,000 over some time period. All right? So, you could buy one Ether for $2,000 and you could sell it when it reaches $4,000 and you'd make a $2,000 profit. All right? Now, what if you bought one Ether and then you borrowed the funds to buy a second Ether and then whenever you sold it, all right, you would essentially double your profit in that case. That's what it looks like to borrow funds to essentially increase your exposure and profit. Now, this does come with additional downside risk, which I'll make very clear towards the end of this video, but that's what it looks like to increase your long exposure. Now, by the same token, you can do the opposite. If you want to essentially, let's say Ether's at $4,000 and you think it's going to $2,000. Well, you can borrow Ether instead of borrowing US dollars. And then whenever the price drops, you can sell the Ether and it's worth less and you can actually make a profit that way. All right, so let's look specifically about how to do this with blockchain technology. Okay, so I've got this application pulled up here. This is a All right, this is one of the original like DeFi apps on the blockchain. So this runs on top of the Ethereum platform as well as many others as well. But essentially it works like a bank where essentially you can deposit cryptocurrency on one side and earn interest and then take out loans on the other side. So you have to deposit money in order to borrow money in this case. And you might think like why on earth would I want to take out a loan if I have to deposit money in the first place, you know, more than what I'm actually borrowing? Well, there's lots of reasons and one of them is a technique that I'm going to show you right now. So, you can see here that you can like deposit, you know, ether like Ethereum cryptocurrency and you can turn on and borrow a stable coin, you know, less than you deposited uh in terms of like USDC or tether for example. Uh so, let's look about what that would look like. So essentially, you can do the long technique that I talked about before by using flash loans and combining them with a. All right. So again, let's just say that ether is

$2,000 and you expect to be $4,000 and you know, you could do this without flash loans. You can basically supply uh you know, one wrapped ether to a you could borrow 1,000 USDC against it. All right? Then you could swap that USDC for ETH and get, you know, a little bit leverage that way. And then whenever you sell it, you know, you can take the profit and you make more than if you just held Ether. All right. Now, you can increase the exposure even more with flash loans to give you even more leverage, more borrowed funds to be able to do this. So, what would that look like? Essentially, let's say that you transfer 2,000 USDC um to A. All right. You additionally flash loan 2,000 USDC from a protocol like Balancer. All right. Then you swap. Now, you have 4,000 total. So, you swap 4,000 USDC uh for two wrapped ether. All right? Then you supply two wrapped ether to a you uh borrow 2,000 USDC from a and then you repay the 2,000 USDC flash loan. So again, before I talked about how flash loans have to happen all in one transaction. Well, all these steps are happening in the same transaction. So basically, you're able to borrow the funds, do all this routine work right here in one go so that you can pay the flash loan back and now you have increased exposure. All right. And then when you go to uh sell the asset, let's say ETH goes from, you know, $2,000 to $4,000 like you're expecting, then whenever you do that, you know, you can make a substantially more profit than if you would just held, you know, one Ether by itself. All right. So that's what it look like to use flash loans plus a DeFi app like a to, you know, do this. All right. Now, you can also do the opposite side of things. So let's say that you're betting on the price of the cryptocurrency going down. Like let's say that ETH is, you know, $4,000 and you expect to go down to $2,000 or, you know, whatever prices that you're thinking of. So, you can go long. Uh, sorry, that's a long example. I want to go short. All right, here we go. Short. Uh, you can go short without flash loans just with a directly. Um, you can supply 2,000 USDC. You can borrow. 5. You could swap the 0. 5 we for USDC. All right. So, essentially again, you're want to borrow the asset that you're shorting. All right. So with flash loans, you can also increase the uh exposure and therefore profitability with shorting as well. So you could transfer one week to the protocol. You could flash loan one week uh swap two we for 4,000 USDC, you know, supply um 4,000 USDC to a turn around and borrow one wrapped ether on a and then repay the one wrapped ETH flash loan. All right. So, with the technique that I'm showing you right now, you know, this is really kind of designed to be for uh sort of like a medium to long-term trade, maybe like a swing trade uh or even a long-term hold with a leveraged position, okay? We're essentially you're expecting a larger move on the cryptocurrency over some, you know, extended period of time, probably not like in 5 minutes, but you could actually turn this into uh a high frequency, you know, trading bot or something like that where you're kind of expecting smaller moves of cryptocurrency over shorter time frames. All right. Now, um, with the strategy I'm showing you right now, essentially, you do some of this, you know, manually or with scripting purposes, okay? Or with a, you know, an app, uh, that sort of enters a position and just exits a position based off your rule set. But you could, you know, turn this into a trading bot that automates this process. You can even use AI in that uh, to help you do that. All right. So, earlier I did talk about there are some risks associated with this strategy. And I'll be very transparent with what these are. So, while you are borrowing funds with flash loans, like if you paid attention to the examples, you see that you're actually combining that with your own funds as well. So, you need some funds, but you're borrowing more funds to increase your exposure and therefore potentially increase your profitability. Now, what's the downside risk? So, anytime you're doing this on a platform like a or any platform that's letting you borrow funds, then you can always uh potentially, you know, especially with volatile cryptocurrencies where the prices are going up and down like crazy. All right? If the prices change on you unfavorably, if you're going long, if it drops too much, if you're shorting, it rises too much. Um, if the price moves too much, you can get into liquidation territory, which could compromise some or all of your position. Now, if you're smart about putting safeguards into place and not, you know, trading too much more than you can afford to lose in these types of situations, and you can greatly mitigate those risks, but they are on the table. I want to be very transparent about them. All right, so that's an overview of how to create a passive income application with flash loans. It works right now in 2026. Now, if you want to steal this exact application, then make sure you hold your spot for the flash loan master class next Thursday, May 21st. Inside, you're going to learn everything you need to know about flash loans and how to do this exact strategy. And I'm going to let you steal my flash loan trading app. Trust me, you don't want to miss this. Hold your spot with the link down below. That's all I've got for today. Make sure you smash that like button down below. Subscribe to the channel. Until next time, thanks for watching. in DAP University.