Say I want to borrow DAI from a MakerDAO contract, exchange the DAI for Ethereum on a Uniswap AMM and then sell the Ethereum for USDT on another AMM, then swap the USDT for DAI on another after finally repaying the DAI, all in the same transaction. What is this an example of?I) A long ethereum strategyII) A transaction that will certainly failIII) A flash loanIV) Liquid staking

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BlackTom AI · Accepted Answer

Let's parse the scenario carefully and assess what each option would imply in this context.
Option a: I) only — A long ethereum strategy. This would imply the user is taking a long position in Ethereum (holding ETH expecting its price to rise) and engaging in the described steps. However, the sequence starts with borrowing DAI, exchanging for ETH, selling ETH for USDT, swapping back to DAI, and repaying DAI all within one transaction. There is no explicit holding of ETH as an investment stance within the same transaction; the core pattern is borrowing and repaying rather than a directional bet on ETH’s price. So labeling this as a "long Ethereum strategy" doesn’t capture the main mechanism at play.
Option b: II) A transaction that will certainly fail — This assertion would claim the entire sequence is guaranteed to fail in all circumstances. In practice, whether such a complex arbitrage/loan-style sequence succeeds depends on on-chain liquidity, timing, price feeds, and pool reserves. It is not inherently guaranteed to fail; there are plausible paths where it could succeed if all market conditions align and the protocol permits the flash/borrowed funds to be repaid within the same block. Therefore, calling it "certainly fail" is too strong and generally incorrect.
Option c: III) A flash loan — A flash loan is a loan of cryptocurrency with the condition that the borrowed amount is repaid within the same transaction (block) and is typically used to perform rapid arbitrage, collateral swaps, or liquidity maneuvers across DeFi protocols. The described sequence—borrowing DAI from a MakerDAO contract, using it to perform sequential trades across Uniswap-like AMMs, and repaying DAI in the same transaction—fits the classic pattern of a flash loan: funds are borrowed, utilized, and repaid all within a single atomic transaction. This aligns well with the intended concept of a flash loan rather than a conventional loan or hold-and-speculate strategy.
Option d: IV) Liquid staking — Liquid staking refers to locking up tokens (staking) while still having transferable representations of those staked assets, enabling liquidity. The described chain of steps does not involve staking a token or earning staking rewards as part of the transaction; it’s about borrowing, swapping assets, and repayment within one transaction. Therefore, this option does not describe the given scenario.
Option e: I) and II) — This would claim both a long Ethereum strategy and a transaction that will certainly fail. As discussed, the first component (I) is not a precise fit for the core mechanism, and II is too strong a claim about inevitability of failure. Hence this combination is not accurate.
Option f: II) and III) — This would claim both a guaranteed-to-fail transaction and a flash loan. While III is plausible, II is not, since the move isn’t inherently guaranteed to fail. Thus this pairing is incorrect.
Option g: III) and IV) — This would claim both a flash loan and liquid staking. While III is a good fit, IV is not relevant to the described operation. So this pairing mislabels the scenario.
Option h: I) and III) — This would claim both a long Ethereum strategy and a flash loan. While III describes the mechanism well, I remains a questionable fit for the core concept, since the emphasis is on borrowing and arbitrage-like maneuvers rather than a long ETH position.
Option i: I) and IV) — This would claim both a long Ethereum strategy and liquid staking. Neither combination precisely describes the sequence of borrowing, swapping across AMMs, and repayment within one transaction.
Option j: II) and IV) — This would claim both a guaranteed-to-fail transaction and liquid staking. Neither pairing accurately captures the described DeFi flow.
Option k: None of the options — This would imply that none of the listed pairings correctly describes the scenario. Given that III) only seems to capture the central concept of a flash loan, this option would be incorrect if III is indeed the intended match.
Overall, the core technical concept most closely aligned with the described one-transaction borrow-use-swap-repay flow is the flash loan mechanism, while the other options either mischaracterize the strategy or rely on incorrect assumptions about guarantees or related notions.

FINS5547-Cryptocurrency & Decentralised Finance - T3 2025

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