3 ms·

Global availability, no questions about the purpose of the loan, not difference in rates depending on purpose, transparency enforced by a smart contract, no hid

Global availability, no questions about the purpose of the loan, not difference in rates depending on purpose, transparency enforced by a smart contract, no hidden fees or upfront costs.

graeme 5y ago
> Global availability Good in theory, but how much does this matter to anyone in a country with a functional financial system? I have access to many loan products > not difference in rates depending on purpose Isn’t this bad for borrowers with valuable purposes or good credit? They’d potentially expect higher rates. > transparency enforced by a smart contract For most people this is akin to saying “you can examine the code yourself!” Most people can’t do that. And it’s not especially difficult to read a loan contract, if you would have the ability to understand a smart contract. How many people taking crypto loans have no idea about liquidation, or capital gains tax obligations in the event of liquidation? > no hidden fees See previous question: it seems like for many sudden liquidation or owing capital gains tax in such an event may be unexpected. > upfront costs Loans normally don’t have upfront costs. The loans seem neat for bringing collateralized lending to crypto, but it doesn’t seem like you’d have much advantage in selling stock and moving to crypto for loans. Or am I missing something?
- PrestonSeal 5y ago
  I think you’re missing a key point here, which is that all of these are also available instantly, 24/7. There is no need to negotiate financing with your bank or otherwise work around a traditional banking schedule. Further to that point, there are new DeFi products like Alchemix which allow for loans on collateral that cannot be liquidated, so not only do you get your money but you don’t run the risk of ever paying interest or gains tax via a liquidation.
  - graeme 5y ago
    Fair, that’s some benefit. Speed and ease do unlock potential. Can you expand on the second point? If something can’t be liquidated/sold, how can it be collateral?
    - merdadicapra 5y ago
      > Can you expand on the second point? If something can’t be liquidated/sold, how can it be collateral? It means that to ask for 1 you need to already own 1 in the form of different cryptos from the one you are loaning. So basically you are asking for money you already have in the first place. With crypto it makes sense: if I loan you 10 bitcoins and you disappear, those bitcoins are lost forever, so to ask for 10 bitcoins you have to put the countervalue of 10 bitcoins in (for example) ETH and freeze them so they act as collateral. If it sounds ridiculous, it's because it is.

Global availability, no questions about the purpose of the loan, not difference in rates depending on purpose, transparency enforced by a smart contract, no hidden fees or upfront costs.

graeme 5y ago

> Global availability Good in theory, but how much does this matter to anyone in a country with a functional financial system? I have access to many loan products > not difference in rates depending on purpose Isn’t this bad for borrowers with valuable purposes or good credit? They’d potentially expect higher rates. > transparency enforced by a smart contract For most people this is akin to saying “you can examine the code yourself!” Most people can’t do that. And it’s not especially difficult to read a loan contract, if you would have the ability to understand a smart contract. How many people taking crypto loans have no idea about liquidation, or capital gains tax obligations in the event of liquidation? > no hidden fees See previous question: it seems like for many sudden liquidation or owing capital gains tax in such an event may be unexpected. > upfront costs Loans normally don’t have upfront costs. The loans seem neat for bringing collateralized lending to crypto, but it doesn’t seem like you’d have much advantage in selling stock and moving to crypto for loans. Or am I missing something?

PrestonSeal 5y ago
I think you’re missing a key point here, which is that all of these are also available instantly, 24/7. There is no need to negotiate financing with your bank or otherwise work around a traditional banking schedule. Further to that point, there are new DeFi products like Alchemix which allow for loans on collateral that cannot be liquidated, so not only do you get your money but you don’t run the risk of ever paying interest or gains tax via a liquidation.
- graeme 5y ago
  Fair, that’s some benefit. Speed and ease do unlock potential. Can you expand on the second point? If something can’t be liquidated/sold, how can it be collateral?
  - merdadicapra 5y ago
    > Can you expand on the second point? If something can’t be liquidated/sold, how can it be collateral? It means that to ask for 1 you need to already own 1 in the form of different cryptos from the one you are loaning. So basically you are asking for money you already have in the first place. With crypto it makes sense: if I loan you 10 bitcoins and you disappear, those bitcoins are lost forever, so to ask for 10 bitcoins you have to put the countervalue of 10 bitcoins in (for example) ETH and freeze them so they act as collateral. If it sounds ridiculous, it's because it is.