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What I never understood about crypto finance is how it shall replace tradfi when it can only offer overcollateralised loans?
by WanderPanda 4y ago
What I never understood about crypto finance is how it shall replace tradfi when it can only offer overcollateralised loans?
- tornato7 4y agoIt only offers overcollateralized "trustless" loans (ie instant with no credit check or KYC). However, KYC'd undercollateralized lending protocols are making some headway. The most popular one currently is called Maple, wherein delegates can perform credit checks on borrowers, and provide first-loss capital, while lenders can be you and me. One can imagine that a "crypto finance" mortgage would look similar to a traditional mortgage in that credit checks and property assessments are needed, however when on-chain it could be done with more transparency (and having just gone through the process I can tell you it is NOT transparent) - the biggest benefit would be borrowing money from a real pool of user capital as opposed to a bank, so real people can earn 7% APY on their money backed by a basket of home loans, with a very transparent middleman. Does that make sense?