It's a loan with a guaranteed atomicity in repaying.
A single atomic transaction does:
1) Borrow $80M
2) Use $80M however you want
3) Return $80M + loan fees (e.g. on Aave this would be 0.09%)
The lender is algorithmically guaranteed to get the money back and the borrower can potentially take advantage of large scale transient opportunities, or...just wreak havoc on a poorly secured system.
And if you're wondering "but why??", if I'm not mistaken, one of the initial use cases for flash loans was in exploiting arbitrage opportunities, which tend to be transient with fairly low returns, which means you need access to large amounts of funds fairly quickly in order to take advantage of them.
They’re used a lot to maintain uniform exchange rates across Defi projects etc. In theory allowing anybody to borrow a lot of tokens to exploit arbitrage opportunities means that the rates will converge simply due to market forces (because if one project offers a better rate than another it will quickly be arbitraged away).
It's a tool for...atomically loaning and repaying large amounts of money. You can use that however you want, most typically for arbitrage to bring markets into equilibrium while earning a profit. The arbitrage isn't fundamentally different from what happens in traditional markets and flash-loan-like primitives are being developed outside of crypto.
(I don't know what the second question means or what your mental model of a "real" currency is)
A flash loan is a risk free crypto loan. It works by releasing the money only on the condition that it is returned before the end of the block. If it is not returned by the end of a block, the block is invalid and can not be added to the blockchain (provided the majority follows the block chain rules). Any block that is added to the blockchain has an exclusive lock to the entire block chain (no two blocks can "happen" at the same "time") meaning this guarantees atomicity of what happens in a block.
But then how are the funds used? Why is somebody able to transact with funds that they will receive in a block that hasn’t yet been added to the chain?
3. give LOANER_ADDRESS (amount_borrowed + interest)
When 2. is executed, the loanee has the money. When 3. is complete, the loaner has the money back. If the loanee doesn't have the money to give, 3rd step fails. And since its atomic, the whole transaction fails.
A single atomic transaction does:
1) Borrow $80M 2) Use $80M however you want 3) Return $80M + loan fees (e.g. on Aave this would be 0.09%)
The lender is algorithmically guaranteed to get the money back and the borrower can potentially take advantage of large scale transient opportunities, or...just wreak havoc on a poorly secured system.
More info here: https://docs.aave.com/developers/guides/flash-loans