[ 3 / biz / cgl / ck / diy / fa / ic / jp / lit / sci / vr / vt ] [ index / top / reports ] [ become a patron ] [ status ]
2023-11: Warosu is now out of extended maintenance.

/biz/ - Business & Finance

View post   
File: 7 KB, 225x225, images.jpg [View same] [iqdb] [saucenao] [google]
28879467 No.28879467 [Reply] [Original]

Can someone explain to me in simple terms why crypto lending is a big deal? Why would I just not buy the coin I want rather than using another coin for collateral? Please explain to me like I'm 5.

>> No.28879539

too big brain game for you

>> No.28879615

>>28879467
[Legal] Tax avoidance. Crypto loans do not constitute taxable events in the U.S. (yet).

>> No.28880870
File: 59 KB, 900x770, 1595581404795.jpg [View same] [iqdb] [saucenao] [google]
28880870

Okay anon, here goes... be sure to take notes!

Imagine a world with apples and oranges. You have apples and you believe that they are fairly priced but that oranges are way to expensive. So you believe that the prices of oranges will go down in the future and you want to make money based off of this assumption. AAVE let's you deposit apples as collateral which hopefully will remain at a stable price point and in turn AAVE also let's you borrow Oranges. You take these oranges and sell them at your local farmers market for a sweet sweet high price. Then one week later you were wrong and oranges kept rising in price faster relative to your apples. Your apples got liquidated and since you borrowed oranges at roughly 140% collateralization you got REKT.

You see AAVE let's us do shorts but conversely AVVE also allows us to long :)

>> No.28881370

You bought in link at 0.20 with the little money you had saved up as a wagie. Today your linkies are worth half a million. You found a new coin you would like to get in, but you’re still making minimum wage at McDonald’s. You don’t have any cash saved up, so why not borrow against your linkies? Your new coin goes x10. This is how you multiply wealth.

>> No.28881987

It’s the 1%er game enabled for us plebs

>> No.28882251

It's free money for Linkies

>> No.28882537

>>28879467
because you cant borrow the fiat from traditional lenders due to bad credit rating etc

>> No.28882753

>>28879467
Let's say you have many LINK and want to buy a new car without selling them because you think they'll go up in price. You deposit them on AAVE and borrow the necessary stablecoins to cash out and buy the car.

>> No.28882950
File: 129 KB, 820x548, problem.jpg [View same] [iqdb] [saucenao] [google]
28882950

>buy blue chip like ETH
you want to go participate in some yield farming defi scams, but want to maintain exposure to your ETH.
>instead of using ETH to buy scamcoin of your choosing, use eth as collateral to take out a loan
>using said loan, buy scamcoin of your choosing (lets say SUSHI)
>buy and farm SUSHI for a lil while, until satisfied
>once you have enough to repay loan + interest + gas fees + however much profit you want to take, repay it, and claim your collateral (the underlying ETH)
>free money

>> No.28882984

>>28882753
what if i got liquidated? can i stay in debt with AAVE corporation SA orr i just lose my linkies

>> No.28883070

>>28879467
It's the equivalent of a home equity line of credit.

You don't have to sell your house (bitcoin) because you believe it will increase in value in the future, but you can take a loan out against it for money you need now.

The bigger deal is it cuts the banks out and anyone can do it. It's p2p and trustless.

>> No.28883225

>>28882984
You lose your linkies.

But I'd make sure to heavy collateralize my loan to avoid liquidation.

>> No.28883363

>>28879467
If you dont want to sell your crypto and needed USDT you could lend your crypto, get liquidity, go on with your business, then re-pay the loan and recuperate your crypto.
Revolutionary.
In 2021 you dont need to sell your crypto anymore.

>> No.28883477

>>28879467
Every answer so far is wrong.

It's a big deal because you can earn interest on stablecoins. Right now, in the real world, it is almost impossible to earn a real return on your dollars. People would kill for a 3% yield. In Defi, 5% yield is like what are you doing tier.

Since AAVE is permissionless, uncensorable, and scalable, literally anyone with internet access can connect a wallet and earn a very safe yield on their money. The modern ponzi economy is built on the Fed's ability to keep rates suppressed--- AAVE, and protocols like this, will prevent them from doing so. It is only a matter of time now.

>> No.28883641

>>28883477
why would I borrow it from AAVE then instead of just borrowing from the fed?

>> No.28883811

>>28883477
I'm sitting on about 15k cash. Wanted to go harder into crypto but already have 6 figures in and dont want it in the stock market. Could I put it into USDT or whatever and earn a decent percentage on AAVE?

>> No.28883873

>>28879467
You borrow a coin and sell it immediatle

If the value goes down like you predicted, you buy the coin again and give the coin back.

You profit from the difference between the price at which you sold when you borrowed and the price at which you bought to give it back

>> No.28883959

What if I manage to call the absolute top of the bullmarket, and instead of selling I borrow against my BTC.
The bearmarket starts, everything dumps, my debt with AAVE will decrease or do I have to pay the amount in USD I borrowed initially?

Enlighten me anon senpais.

>> No.28883972

>>28883641
you can't borrow from the fed

>> No.28884228

>>28881370
but what if linkies go down? On big cex your position gets liquidated, but on decentralized loans, how would that work?

>> No.28884262
File: 104 KB, 1468x504, 2021-02-16_20-12-15.png [View same] [iqdb] [saucenao] [google]
28884262

>>28883811
You can, maybe not put all on AAVE if get hacked you are fucked

>> No.28884420

>>28883959
>>28884228
https://docs.aave.com/faq/liquidations

>> No.28884423

>>28879467
Venus is literally the better AAVE and without the gas fees tho

>> No.28884981

>>28883972
I can borrow from a bank that borrows from the fed, for like a 1% apr on a house.

>> No.28885275

>>28884981
yes you can do that and collect the spread of about 10%
if i had a house i would take a heloc and do that, too bad my parents won't

>> No.28885457

>>28883641
You wouldn't borrow from AAVE. You deposit to their smart contract and earn interest. Simple.

>>28883811
That's what it's made for. You can go further out the risk curve with stuff like Yearn and other autofarmers, but for me AAVE is the safest and can offer really good stable yields.

>> No.28885535

>>28885457
so who borrows from you?

>> No.28885643

>>28885275
DELETE

>> No.28885716

>>28885535
leverage traders mostly

>> No.28885839

>>28885716
so people with gambling problems are my counterparty?

>> No.28885981

>>28880870
wow so the same thing we can do on binance?
what's the difference then?

>> No.28886004

>>28885839
yes

>> No.28886074

looks like we're already priced out, is there an alternative to AAVE or something similar?

>> No.28886107

>>28879467
I have an asset that I dont want to sell because it will go up slowly, but it will go up
meanwhile I know of another asset that will go up faster, I want to buy it but I dont have the money and I dont want to sell my first asset to buy it, so ill borrow money, leaving my asset A as collateral to buy asset B and once the prices of B go up, I can sell B to repay the loan and get back my asset A + profits.

>> No.28886145

>>28885839
Right but it auto liquidates on them and you are garenteed repayment. So no credit risk

>> No.28886175

>>28885981
decentralized
no need to open any special margin account
you can be the lender and get safe return
you're not limited to 1 assets when you took your loan, you can buy anything with it
you can put as collateral whatever you bought with the loan to increase its healh factor

>> No.28886290

>>28885981
aave is a set of smart contracts that cannot be turned off, binance is controlled by a scamming chink that can steal your money at any time or get thrown in jail

>>28885839
not directly, it's a pooled liquidity model. And not all leverage is degenerate-- pretend you have 1000 BTC, and you need some money but also believe that BTC will continue it's logarithmic trend-- why sell when you can just borrow against your holdings?

>>28886074
retard tier thinking

>> No.28886314

>>28886175
>collateral whatever you bought
correction, if what you bought can be used as collateral

>> No.28886534

yes

>> No.28886760

>>28886290
>pretend you have 1000 BTC, and you need some money but also believe that BTC will continue it's logarithmic trend-- why sell when you can just borrow against your holdings?
ok, but how do you profit from it in a bear market when everything just crabs for years?

>> No.28886851

>>28886760
From your bitcoin? Or from AAVE?

IF the latter, you deposit stables and earn interest.

>> No.28887018

>>28886851
so you put money into stablecoins, but do you also leave your bitcoin there as well? so the interest you earn from bitcoin you just buy stablecoins which also earns interest

>> No.28887242

>>28887018
you will earn a little interest from your bitcoin, but the value of your bitcoin will be dropping because it's a bear market

>> No.28887486

>>28887018
collaterize a stablecoin, borrow btc, sell it, buy lower, pay back loan keep difference

>> No.28887737

>>28887242
can you tell me about GUSD? why on aave is their apy at 30% and yet all the other stable coins are a little more than 10%?
so if i were to put in 10k on GUSD, I would make 3k in 1 year?

>> No.28889054

stablecoin borrowing has a ludicrous apr, why would I want to pay such high interest unless I’m only trying to get a short term loan

>> No.28889562

>>28881370
Do you borrow Stable Coin or Link? If you borrow stable coin is the interest a lot higher then if you just borrow Link?

>> No.28889658

>>28887737
the rates are just a function of supply and demand and change over time, but it is possible to lock in a stable rate

>>28889562
if you borrow link you are short

>> No.28890144

>>28885981
...it's decentralized
why are you in crypto

>> No.28890431

>>28889658
wait im a brainlet. if i borrow link, im short? so im selling it at a lower price? that makes no sense

>> No.28890657

>>28890431
You borrow link and sell it immediately. Then, you buy back at a lower price and pay back the loan pocketing the profit.

Obviously you shouldn't do this if you're a brainlet.

>> No.28890733
File: 224 KB, 488x680, flash_magic.png [View same] [iqdb] [saucenao] [google]
28890733

>>28879467
Why do this complicated shit when you can just lock $FLASH and get money upfront? It should be this easy, anon, but with Flashstake it is.
Fuck lending and borrowing money. Just flashstake it

>> No.28890834

>>28890657
yes understood. thanks anon for the clarification.

>> No.28891703

>>28879467
Difference between AAVE and BlockFi in terms of interest holding? How secure is AAVE? I mean we’ve seen countless times these things have been hacked look at yfi and comp for example.

The USDC interest on AAVE is really catching my eye.