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Lending requires the ability to seize assets, and the ability to seize assets requires a legal system. There's no way around it. Without this lending can't wo
by lottin 4y ago
Lending requires the ability to seize assets, and the ability to seize assets requires a legal system. There's no way around it. Without this lending can't work, because otherwise the borrower can just walk away with the money.
- charcircuit 4y ago>There's no way around it You can have assets on chain that can be used as collateral which can be liquidated if a loan isn't paid back. Additionally lending money is not only done so people can borrow from it. For example decentralized exchanges need a lot of liquidity in order to execute trades without very much slippage. You can provide liquidity to them and they will pay out transaction fees to you in exchange.
- lottin 4y agoIf you have to pledge enough collateral to cover the entirety of the principal, your net investment position is either zero or positive. In other words, you're not borrowing anything.
- charcircuit 4y agoYou are right in that it doesn't make much sense if your collateral is made up of stable coins, but if you had something like bitcoin you may not always want to just trade it for stable coins, do whatever, and then trade back for bitcoin as the price can change. It may be better to just deposit your bitcoin onto one of these platforms (yes you start getting paid for lending bitcoin to them for as long as you keep your bitcoins there). Then you have the ability to borrow a certain amount of some other coin without having to liquidate your bitcoin. If doing so was useless, pawnshops wouldn't exist in real life. There is value in not having to sell something and later try to rebuy it.
- lottin 4y agoI never said that it was useless. I said that this isn't borrowing and lending. Borrowing and lending is the primary and most important function of finance. It allows economic agents to trade future consumption for present consumption. Yet it is fundamentally impossible using blockchain technology.
- deleted 4y ago[deleted]
- ohy 4y agoThere is still use for that if the asset you deposit is: a) expected to appreciate in value b) yield-bearing itself and you don't want to sell it.
- lottin 4y agoI didn't say that it has no use. I was pointing out that blockchains do not allow "borrowing / lending money to other people without the parties having to trust each other or having to wait for a slow and expensive legal", contrary to what the OP claimed.
- ohy 4y agoI didn't claim you said it, either, just wanted to mention why it can still make sense. However, the process of depositing something as collateral (irrelevant of the value) and borrowing on it can be described as just that, borrowing.