Questions about DeFi for Someone New to those Ideas

[JanusQuadrifrons]

Are people only trading the crypto they borrow or withdrawing and doing other things with it (possibly in the real world?)

If people are mainly just trading what they borrow, what happens if they lose all of it/a lot of it and can pay back the amount?

[tranthidung]

It is as simple as that and the DeFi companies don't take all risks this way. There are two main factors:

• Collateral
• Liquidation

If you are familar with trading on crypto exchanges, you should know the leverage tradings in which you have to deposit your assets (BTC or some other altcoins) as collateral for you loan. Then you can use your loan for leverage trading. Depends on how low or high the leverage you use and the total value of your collateral at one point of time, a risk of liquidation will be higher or lower compare to the position it is in the beginning of your loan.

Loan on DeFi is more complicated but they do have collateral and liquidation rules. So yeah the risk mainly relies on loan-takers and faults in smart contracts.

You can read more at [Tutorial] Decentralized Finance (DeFi) for Noobs and if it does not satisfy your need, you can find more at [DeFi] Some excellent topics on DeFi..

[aryana42]

Borrowing for trading matters is very ridiculous and high risk, because the cryptocurrency market is always difficult to predict, so people who borrow for that are stupid people even though they already have a lot of experience in crypto, but they will still lose out. if you experience a loss in its assets.

[Iyeman]

Are people only trading the crypto they borrow or withdrawing and doing other things with it (possibly in the real world?)

If people are mainly just trading what they borrow, what happens if they lose all of it/a lot of it and can pay back the amount?

Yes, they are. You must try to read the requirements to be eligible to get loans in the crypto. You must also escrowed the collateral that if you are seeing it from the value and it must be even higher than your loan. That means when you are not paying back your loans and your collateral will be disappeared to pay your loans.

The collateral will be matched with the interest from your loan too.

[lixer]

Are people only trading the crypto they borrow or withdrawing and doing other things with it (possibly in the real world?)

If people are mainly just trading what they borrow, what happens if they lose all of it/a lot of it and can pay back the amount?

I doubt that people would trade with what they borrow, it is not really reasonable to assume that people would not have any money and take out loans to make trades in order to profit, that would result with horrible stuff. In defi world it is about the same, collateral is something important, lets say you take 100 dollars eth, you give 120 dollars btc for it, so if you lose all your 100 dollar eth loan, they take your 120 dollar btc and it is done.

This in fact used to happen with bitcointalk as well, there were people here on bitcointalk lending section that took collateral in forms of weird coins that worth a lot, and gave bitcoin instead, if you pay your loan back you got your collateral back, if you failed you lost more money. Never understood the idea of having money but locking it for getting loan, if I have money that means I shouldn't need loan.

[Shallow]

The crypto space comes with its own risks coupled with the fact it is unpredictable, how then can someone having knowledge of this goes the length of borrowing in order to trade, to me, it is an unreasonable thing to do as the risks involved is too much. Also, I do not think someone who is really experienced in crypto trading will take this type of risks because it is not worth it, hence the reason it is very important to first have the knowledge of trading before venturing into it.
Nevertheless, one can hardly lend or borrow without presenting collateral, but however I would never advice anyone to borrow for trading.

[jrrsparkles]

Are people only trading the crypto they borrow or withdrawing and doing other things with it (possibly in the real world?)

If people are mainly just trading what they borrow, what happens if they lose all of it/a lot of it and can pay back the amount?

Defi is not only about lending and borrowing there are lot others included in it and its simply the dapps created which eliminates the middle men between both parties, currently defi lending and defi exchanges are so much popular than other like insurance 3 layer applications and derivatives.

[dmzworld]

Borrowing crypto is a high risk which I can't undertake, though you must deposit certain crypto for collateral before you borrow, so if you lost your crypto, your collateral is gone. Moreover, I want something I will do and sleep well at night.
I will rather hodl my crypto, $BLZ https://bluzelle.com and wait for its best time to go moon.
Take it or leave it, every altcoin has its own perfect season and time. One just has to understand this fact as a crypto enthusiast and be up to date...

[Vintry Dribbler 1975]

Are people only trading the crypto they borrow or withdrawing and doing other things with it (possibly in the real world?)

If people are mainly just trading what they borrow, what happens if they lose all of it/a lot of it and can pay back the amount?

I haven't looked into defi before now (and your English is a little stilted), but if I'm reading your question correctly, then I can see a big crash coming in the defisphere.  Borrowing and not paying back in this forum is seen as a scam.  Once people get a taste for borrow/not pay back/borrow again, we'll see a whole new wave of scams occurring.

Think Mortgage Subprime.  Debt was on-sold to those who thought they could make a quick buck, then on-sold again (and again).  The debt never went away.