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Basically what this (and DeFi in general) is is a decentralised lending platform and "liquidity farm". The lending part is relatively self-evident. You can poo
by jacoblambda 5y ago
Basically what this (and DeFi in general) is is a decentralised lending platform and "liquidity farm".
The lending part is relatively self-evident. You can pool funds together and the contract automatically issues loans when requested provided the user has X amount of collateral. Most "DeFi" lending basically acts like a margin for margin trading at the moment.
The liquidity farming however is a bit more practical. It's creating pools of liquidity for decentralised exchanges and various "cross-network" smart contracts to temporarily source coins out of.
There's a lot of dogfooding going on but the general system behind it is useful. It's just overly simplistic and the code lacks pretty much any scrutiny in a lot of these cases.
- echelon 5y agoWhat happens if you don't pay back a DeFi loan?
- jacoblambda 5y agoIn most cases it's bound to your collateral so if you don't pay back or the value of the collateral dips below some level, the loan is automatically reclaimed from your collateral. A lot of the loans are 1:2, 1:4, or greater depending on what the currency it is being traded in is. If your total collateral dips below that multiple of the loan, you forfeit the value of the loan from your collateral plus some penalty fee.