Bitcoin Forum

I was trying to understand defi recently.

For those who doesn't now, the last buzzword in cryptocurrencies are those defi.
In simple terms, you provide a collateral (eth) and get some eth back, everything locked in a smartcontract.

As ou provide the collateral, you will be forced to pay back.

But why the hell would I borrow from a defi something I already have????

What is most crazy about this is that the APY are incredibly high. More than 10% per year. Simple crazy.

If I want to open a new business and I need 10 k usd. Can I get from a defi? Yes  ofc ,just give the defi 10k usd as collateral and you can get mew 10k usd  borrowed. Isn't that really stupid?

What is that for? How come there are millions of dollars in such an useless scheme?

I found  this

https://medium.com/coinmonks/why-would-one-borrow-from-defi-5ef494a6d1b9

How long will this last?

Defi are so empty as ICO. A nice idea about what could be. Then we all realized that certain things cannot really be decentralized.  When anyone can open an ico, 99.990% of them are open scams just stealing money. This is why it's so hard to make an ipo (to be sure they won't run away with our money)

And defi? Well  we know now that nobody wants to borrow without a collateral. So nobody really wants to borrow. Only centralized banks... sad.

Yeah.

But not every people have the same purpose why they borrow from DeFi, let's say the purpose to borrow for trading since his asset on a different asset and doesn't wanna sold his asset.

Borrow from DeFi could be an option, he catches 3-7% in the short term trade sold again his borrow money and pay your lend taking the profit and take back the collateral without being sold.

So, IMO all depends on the purpose why the person borrow the money

People either:

1. Borrow on lending platforms because they think they can find a higher return elsewhere

2. Borrow to receive governance tokens

3. Borrow to play yield farming games to multiply returns

There are uncollateralized or lending platforms with lower collateral in the works, the issue is trust when you borrow without 100% collateral.

It makes sense because you are not selling your crypto that has 10x to 100x growth potential but at the same time you are using the money against it with small profit rate which is nothing when compared with the potential growth of the crypto asset, I assume you are new to all this defi and crypto business because it is not hard to think of the value of this service. Also you have asked bout business loans so please keep in mind that defi is a new thing but with time new projects are platforms will come up and hopefully all aspects of business and finance will be covered by defi.

And yet cryptobros had the audacity to proclaim that traditional finance is on its last breath and DeFi will replace it within years, lmao. To me it has always been clear that DeFi is just a fad and at best it could be used for speculating on shitcoins and not much more. There will never be any switch from traditional finance to DeFi, it's just technologically impossible, so you don't even need to start thinking about how unsecure DeFi is with all the hacks that we have seen, the lack of Ethereum scalability, centralization issue of Ethereum and so on.

DeFi will never replace the traditional finance, not at the moment.
A lot of these DeFi platforms are just here for quick cash, not really has the intentions to stay long and do what is right.
I don't think many people will patronize DeFi in the long run. Some are asking for unreasonable collateral before they can get their loans.
Better deal with traditional banks, at least you know you are dealing with legit entity.
I don't think the mission of DeFi will prosper as it is shrouded by too many shady steps. Just my 2 cents.

I also think so. DeFi is unlikely to replace traditional finance. it is absolutely impossible. It's better to visit a traditional bank to borrow funds, and that keeps our collateral safe. it would be very risky to give our guarantee to DeFi.