BTC LENDING

[Yasceine]

Hi,
In Poloniex, there is something called BTC Lending which has Loan Offers and Loan Demands. Can anyone explain what this means? and how can one utilize it?

Regards

[HeRetiK]

Loan demands are made by people trading on margin, ie. borrowing coins to either short them or to use them for leveraged trading.

Loan offers is people lending coins to margin traders as mentioned above, offering them for a certain duration (at least 2 days) for a predefined interest rate (defined per day).

If your interest rate is too high, no one will take a loan from you, as you will get undercut by other market participants. If your loan offer gets accepted, you will then get a daily yield based on your preset interest rate. Your coins will get returned to you either a) after the preset duration has passed, b) the margin trader closes their position or c) the margin trader gets hit by a margin call and has thus their position liquidated.

[Re.won14]

Loan demands are made by people trading on margin, ie. borrowing coins to either short them or to use them for leveraged trading.

Loan offers is people lending coins to margin traders as mentioned above, offering them for a certain duration (at least 2 days) for a predefined interest rate (defined per day).

If your interest rate is too high, no one will take a loan from you, as you will get undercut by other market participants. If your loan offer gets accepted, you will then get a daily yield based on your preset interest rate. Your coins will get returned to you either a) after the preset duration has passed, b) the margin trader closes their position or c) the margin trader gets hit by a margin call and has thus their position liquidated.

I have a question on this, how does lender ensure that they would get their coin back? Also for example I borrowed a loan then i tried to make a trade and unfortunately didn't succeed, how could he bounce back from this lose?

[HeRetiK]

I have a question on this, how does lender ensure that they would get their coin back? Also for example I borrowed a loan then i tried to make a trade and unfortunately didn't succeed, how could he bounce back from this lose?

That's what the margin calls are for. Margin calls are enforced by the trading engine automatically canceling any losing positions before the balance of the margin trader reaches below zero. Short of the trading engine failing due to a software bug your coins should be safe from the lending party defaulting on you. The systemic risk of the respective exchange getting hacked or... getting "hacked"... remains of course.