I don't know much about this at all so apologies if this is a stupid question, but presumably the owner of that $8m was compensated out of the profit of the deal and the $366k is what is left over for the person who set this deal up.
If so that was a great deal and worked out, but if the deal hadn't worked out for whatever reason, a bug in the code for the bot etc what would the downside be and how would it be enforced?
The owner of the $8 million was a smart contract, in this case a DEX (decentralized exchange) pair on Pancakeswap. Yes, the contract is designed to do this. I believe the fee on that pair is 0.25%. Technically this was a “flash swap,” not a flash loan, but they are functionally equivalent for purposes of this discussion.
If the contract loans the tokens and isn’t paid back by the end of the transaction, it reverts as if nothing ever happened. Ethereum transactions are “atomic” - either all parts of the tx succeed, or they all fail. So there is no risk to the lender, they always get paid back.
If so that was a great deal and worked out, but if the deal hadn't worked out for whatever reason, a bug in the code for the bot etc what would the downside be and how would it be enforced?