/biz/ - Business & Finance

[Anonymous No.22001430]

So with DeFi could anyone just take out a $100k loan for like 0.5% APR ? How does this shit work? I want to buy a home with a loan and i'd rather use a crypto backed loan cause it seems like a better deal than a loan from a bank.

[Anonymous No.22001460]

>>22001430
why would you like to pay high interest?

[Anonymous No.22001471]

>>22001430
Ya the demand for this will be massive. Doubt it’s .5% Fucking hated the Bank loan process wish they would duck my nuts

[Anonymous No.22001507]

>>22001460
He said .5 not 5%

[Anonymous No.22001513]

>>22001430
With stuff like AAVE you will need like $200K+ in collateral in order to take out a $100K loan. And the interest rates are more like 2-4%

[Anonymous No.22001534]

>>22001430
Yeah but remember it has to be overcollateralized. So if you want to take out a $100k loan, you need to have ~$120k-150k worth of crypto locked up.

It's still a good idea. Borrowing against cryptocurrency is not taxed, so if you never pay back the loan it's kinda sorta like selling it without paying taxes.

[Anonymous No.22001564]

>>22001471
>>22001534
Do you have to have the collateral locked the entire time?

[Anonymous No.22001591]

>>22001564
Also what if the crypto loses a shit ton of value

[Anonymous No.22001634]

>>22001534
and the loan is backed by smart contracts? so if you don’t pay back the loan your collateral automatically gets deducted? I usually hang out in /smg/ but all this DeFi shit sounds interesting

[Anonymous No.22001658]

>>22001634
It is. It’s the future can you imagine the retail demand to not have to deal w the motherfucking bank

[Anonymous No.22001677]

>>22001591
You would get liquidated. Bye bye crypto, but you get to keep the house

[Anonymous No.22001681]

>>22001591
You need to keep a high health factor so if your crypto goes down 50%+, it doesn't get liquidated. So $100k deposited as collateral, borrow $20k and as long as your crypto doesn't go to $20k, you won't get liquidated. Aave shows the health factor before you borrow.

[Anonymous No.22001682]

>>22001534
do you know if this works in canada?

[Anonymous No.22001696]

Honestly I don’t know how you leave smart con And aren’t all in link, we’re gonna see a major green soon for sure

[Anonymous No.22001722]

>>22001681
what if you just use USDC as collateral?

[Anonymous No.22001734]

>>22001591
If your crypto drops in value below the liquidation level (where your loan value reaches 60-80% of your crypto value, depending on the token) then it will all be sold to pay off the loan and you will have nothing left.

I heard they do it in stages though, like they’ll just liquidate a portion in order to bring your loan to good standing and if it keeps falling they’ll liquidate more then

[Anonymous No.22001743]

>>22001681
After I get a bank loan I can go and burn all my money through right it’s not like they are actively monitoring it. Not so much the case here it seems

[Anonymous No.22001778]

>>22001734
Kind of annoying tho if crypto crashes you get fucked esp flash crashes, whos to say it’s not going to soar like 2-3 months later and we’ll you lost your shit

[Anonymous No.22001781]

>>22001634
Your interest on your loan is automatically calculated in the total amount you owe, which constantly increases. If the total ever exceeds the liquidation threshold, you'll lose at minimum a 10% penalty fee on top of whatever you owe in collateral. Then you'll have to pay income tax amount on the defaulted loan size.

[Anonymous No.22001795]

>>22001634
You need to have collateral locked up the whole time, need to maintain a certain LTV (loan to value) ratio as required by the site.

If your cryptocurrency falls in value, you're in danger of being liquidated- aka some of the crypto you have backing the loan is no longer yours, until the LTV has been met again. (It's not an automatic process- at least in compound.finance, anyone can liquidate an position that's below the LTV, so bots usually do it.) So there's incentive to overcollateralize beyond the minimum requirement.

>>22001722
You can use stablecoins as collateral. What are you using it to borrow?

>>22001682
Defi works anywhere, these things aren't really regulated. A lot of people prefer to use a centralized company like Blockfi or Nexo (less smart contract risk) but those are only allowed for use in certain states/countries

[Anonymous No.22001840]

>>22001778
If you look at it the other way, if the crypto crashes hard enough you might have come out ahead. It's like a really expensive stop loss, but you get the proceeds earlier.

[Anonymous No.22001866]

>>22001795
thank you,
and i meant my question in like a tax-related way

>would those tax implications work in canada?

[Anonymous No.22001882]

this is all very interesting, thank you all for your answers. I never realized people were already doing DeFi stuff until a couple days ago.

I’m a 30 year old zoomer, are there any youtubers or videos that give a good DeFi rundown

[Anonymous No.22001915]

>>22001882
Unironically defi dad lmao

[Anonymous No.22001921]

i just took out a 87k loan with 2% apr using aave. took 10 seconds.

[Anonymous No.22001929]

>>22001795
idk i guess this stuff isn't as good as i thought. i just wanted a big loan at a really low APR

[Anonymous No.22001938]

>>22001915
thank you sirs

[Anonymous No.22001951]

>>22001921
how much collateral did you have to put up? and what did you use for collateral?

[Anonymous No.22001960]

>>22001866
oh, not sure. I imagine so? google something like 'borrowing against collateral taxes canada'

[Anonymous No.22001970]

>>22001882
No it's pretty much brand new. There's some videos that have been made but they're sort of obsolete by now, so there's not any I'm aware of. Everything is moving so quickly. I suppose https://defipulse.com/ is a good starting place.

[Anonymous No.22001980]

>>22001960
thanks anon
im kinda retarded for asking you anyways and assuming you know

[Anonymous No.22001997]

>>22001960
sounds like you're good
https://koinly.io/guides/crypto-tax-canada/

[Anonymous No.22002058]

>>22001997
wow thank you man

[Anonymous No.22002226]

>>22001591
It will gradually be confiscated and sold to pay for the loan with a 10% premium to compensate liquidation arbitrage (anyone can do it).
>>22001778
Chainlink oracles are the safeguard against that. They have proven to be foolproof both in prolonged crashes (March) and flash crashes (we just had that one big btc drop a few weeks back)

[Anonymous No.22002257]

>this entire thread doesn't know about flash loans and arbitrage

[Anonymous No.22002296]

>>22002257
Shhhhhhhh

[Anonymous No.22002868]

>>22001882
Just watch smart con it was absolutely fucking based

[Anonymous No.22002900]

>>22001921
How much collateral? And what’re you doing w the $

[Anonymous No.22003063]

can someone explain to me, a brainlet, why you would need to get a loan for an amount of money if a requirement to getting that loan was that you needed am even larger amount of money that needs to be locked up?
Why wouldn't you just use that initial, larger, unlocked amount of money instead?

[Anonymous No.22003093]

>>22003063
I am holding link. I don’t want to sell link but I want to use that money to buy a shitcoin. I use link as a collateral for a loan so I can buy the shitcoin without selling link

[Anonymous No.22003161]

>>22003093
That's extremely degenerate but at least makes some sense

[Anonymous No.22003233]

>>22003161
Shitcoin was just an example for simplicity’s sake. Anyone who isn’t retarded is putting it into a low risk investment. Example: borrow a stablecoin that has a 1% interest rate, then swap it to another stablecoin that has a higher yield to lend out