Bitcoin backed loans on Coinbase

[Glowy]

Surfing through the internet today, with the aim to learn about crypto. I stumbled on a very interesting update. However, like I mentioned earlier, I want to know more about this space, so here is my finding. Coinbase a major crypto giant has taken it's business idea a notch higher.

As Coinbase user, you can borrow up to $100,000 on the platform using your bitcoin, (although New Yorkers are not eligible) as collateral. This means your BTC on Coinbase is staked and there is no repayment plan. A borrower can pay up when they want.

As an individual it sounds good, but then I am new on this space and do not really know how this space works.  I need enlightenment from the bosses in here.

I have a few questions on this new development. These questions are:

Reading further revealed that other loans companies like Blockifi and Celsius went bankrupt and crypto lending lost its trust in 2022.
What happens if a borrower does not pay considering the fact that Coinbase may not be able to access the BTC  even though it is on their platform?

If Coinbase can find its way and access the users BTC doesn't that bridge security and make the user vulnerable and their assets insecure?

Is this move by Coinbase going to scare customers or it is a welcome development?

What is your take on this?

Below is the link to the information... 
https://crypto.news/coinbase-rolls-out-bitcoin-backed-loans-via-defi-protocol-morpho/

[DPHOR]

Realistically I wouldn't see this as entitlement to new people or to someone who is new to the cryptocurrency because as I used from some of the exchanges that offers loan, there most be an equivalent asset that is hold back on the exchange to serve as a repayment purpose.

Coinbase has been the most reputable exchange with a higher trading volume which even if they offers such loan on their platform they should have a means to regulate every loan that would taken from their platform to avoid going bankrupt when borrower has refused to repay back their loans.

[Glowy]

Realistically I wouldn't see this as entitlement to new people or to someone who is new to the cryptocurrency because as I used from some of the exchanges that offers loan, there most be an equivalent asset that is hold back on the exchange to serve as a repayment purpose.

Coinbase has been the most reputable exchange with a higher trading volume which even if they offers such loan on their platform they should have a means to regulate every loan that would taken from their platform to avoid going bankrupt when borrower has refused to repay back their loans.

If this means that users funds are safe, and the platform has a well thought out plan on loan recovery. Then it is a good offer on the table. Especially as the incoming American president is comfortable with cryptocurrency and he has plans of looking into the crypto space to make it easy for crypto enthusiast.

I read he will look into crypto cases pending in court. Coinbase might just have taken a very commendable leap that will keep it ahead of it competitors.

[Gooner0]

:

Reading further revealed that other loans companies like Blockifi and Celsius went bankrupt and crypto lending lost its trust in 2022.
What happens if a borrower does not pay considering the fact that Coinbase may not be able to access the BTC  even though it is on their platform?

If Coinbase can find its way and access the users BTC doesn't that bridge security and make the user vulnerable and their assets insecure?

Is this move by Coinbase going to scare customers or it is a welcome development?

What is your take on this?

Below is the link to the information... 
https://crypto.news/coinbase-rolls-out-bitcoin-backed-loans-via-defi-protocol-morpho/

this seems quite shady from Coinbase ends, how can they acess your Bitcoin? If they could bridge security to do that then truly this move could scare away customers .

I still don't think they'll be able to acess the user Bitcoin, and this loan wouldn't be accessible to everyone though.

[nelson4lov]

~Snipped

If Coinbase can find its way and access the users BTC doesn't that bridge security and make the user vulnerable and their assets insecure?

Is this move by Coinbase going to scare customers or it is a welcome development?

What is your take on this?

Coinbase is a centralized exchange in the most regulated country for crypto. The same saying we always sing on the forum about "not your keys, not your crypto" applies here.

Quoting this here for reference:

Customers pledge their Bitcoin as collateral, which is converted into cbBTC, a wrapped version of Bitcoin created by Coinbase. This wrapped token allows Bitcoin to function within decentralized finance systems.

cbBTC is a token owned by coinbase similar to how USDT is owned by Tether. So if you're indulging in this new and shining coinbase product, you should endeavor to read the terms and conditions of the product and also the lending market offered by morpho.

Unless it's absolutely necessary, I don't suggest participating in crypto lending especially the ones offered by centralized providers.

[Agbamoni]

Of recent i was designing an app for a client and funny enough it has the crypto lending feature. I was really wondering how this is done because crypto lending is totally different from the normal lending apps we see. I noticed that collateral is a must, while BTC is mostly used as a collateral any other asset can be used but one with a good potential.

Regarding the aspect of the platform not able to access the funds that's not true. The collateral asset will be staked for a period of time, most time it has to be the same duration of the loan. After the period has reached if the user does not pay after several warnings. The asset goes directly to the platform. There is no asset on coinbase as long as it is on a blockchain that coinbase cant access.

[Brainiac01]

Realistically I wouldn't see this as entitlement to new people or to someone who is new to the cryptocurrency because as I used from some of the exchanges that offers loan, there most be an equivalent asset that is hold back on the exchange to serve as a repayment purpose.

Coinbase has been the most reputable exchange with a higher trading volume which even if they offers such loan on their platform they should have a means to regulate every loan that would taken from their platform to avoid going bankrupt when borrower has refused to repay back their loans.

Not all asset are allowed for holding back. The reason is because some asset mostly shitcoins can lost value anytime. Only top coins are allowed for holding back. Your right too, the USDT you are borrowing must be equivalent to the USDT of the asset that is being hold back.

Finally there is always a way to get back their money. The asset hold back will belong to Coinbase if any user becomes a loan defaulter. If you read in the disclaimer when taking the loan most of these things are there.

[DPHOR]

Realistically I wouldn't see this as entitlement to new people or to someone who is new to the cryptocurrency because as I used from some of the exchanges that offers loan, there most be an equivalent asset that is hold back on the exchange to serve as a repayment purpose.

Coinbase has been the most reputable exchange with a higher trading volume which even if they offers such loan on their platform they should have a means to regulate every loan that would taken from their platform to avoid going bankrupt when borrower has refused to repay back their loans.

Not all asset are allowed for holding back. The reason is because some asset mostly shitcoins can lost value anytime. Only top coins are allowed for holding back. Your right too, the USDT you are borrowing must be equivalent to the USDT of the asset that is being hold back.

Finally there is always a way to get back their money. The asset hold back will belong to Coinbase if any user becomes a loan defaulter. If you read in the disclaimer when taking the loan most of these things are there.

In fact from the information I also got is that any asset you wanna borrow, your balance is being converted to cbBTC. That is is to say for you to borrow if you have BTC it would be BTC=cbBTC to hold as collateral on their platform before you would be allowed to take loan from their platform. I think to me it's just like autoconvert before receiving loan.

[Glowy]

Of recent i was designing an app for a client and funny enough it has the crypto lending feature. I was really wondering how this is done because crypto lending is totally different from the normal lending apps we see. I noticed that collateral is a must, while BTC is mostly used as a collateral any other asset can be used but one with a good potential.

Regarding the aspect of the platform not able to access the funds that's not true. The collateral asset will be staked for a period of time, most time it has to be the same duration of the loan. After the period has reached if the user does not pay after several warnings. The asset goes directly to the platform. There is no asset on coinbase as long as it is on a blockchain that coinbase cant access.

Your last paragraph brings some kinda thought to mind. The hold back might be accessible to the platform apparently it will be moved out from the user's wallet to some kinda wallet that coinbase can access too. Just my thoughts