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Borrowing, lending, decentralized exchanges, innovations like flash loans that are just not possible in current financial system. The sky is the limit in terms
by rawtxapp 6y ago
Borrowing, lending, decentralized exchanges, innovations like flash loans that are just not possible in current financial system.
The sky is the limit in terms of innovations possible, it's literally some code running on the global computer that is Ethereum.
- humaniania 6y agoNot only are all those things possible (other than decentralized, because that has a high cost and no tangible benefit) in the normal banking system but there's apps for them already. And they are from regulated companies and you have legal protections.
- nostrademons 6y agoFlash loans aren't really; nobody will lend you money against zero collateral that you pay back instantaneously after a transaction, because in the traditional banking system there's always a risk of default and a transaction cost for enforcing your rights in case of default. With a flash loan the whole transaction fails if at the end of the transaction you don't have sufficient funds to pay it back, while you're guaranteed payback if it succeeds.
- gamblor956 6y agoA flash loan is a loan you pay back immediately... So you're right, this isn't a thing that exists today outside of crypto because it's not needed outside of crypto. Someone who can pay a loan back as part of the same transaction in which the loan is issued is not a default risk, and in the real world you just don't bother with the loan: you just pay for the underlying transaction directly.
- trident5000 6y agoMaybe people are tired of getting an anal probe just to open an account and move money/ complete financial transactions today?
- skybrian 6y agoHow does borrowing work in an automated, trustless environment? Doesn’t someone have to decide whether you’re likely to pay back the loan with money you haven’t earned yet?
- rawtxapp 6y agoIt's over-collaterized, so you put more crypto than the loan value. You might say "why the hell would I do that?", in order of importance: 1) you hold on to your asset's appreciation, 2) access the liquidity, 3) avoid capital gains tax.
- skybrian 6y agoOkay, but that seems like a pretty small niche? Most people don’t borrow just to save money on taxes on their cryptocurrency gains.
- rawtxapp 6y agoThey might borrow to hold on to their asset's appreciation.
- skybrian 6y agoYou could lock in the gain by selling at the current price, so that still sounds like tax avoidance. Or possibly leverage, if you think the price will go up more?
- rawtxapp 6y agoYes, you could leverage, you could hedge yourself by buying stocks. Or you could just spend the money on whatever else you want.
- lasc4r 6y agoSo the killer use case is a scheme to avoid capital gains taxes? Sounds about right.