Why would you collateralize HBD to get HBD?
Just sell it for USD or other token if it’s 1:1.
Who is going to do the collection if the collateralized assets become impaired? (If paired with different assets)
The borrower would just simply walk away.
The idea for collateralized lending is 2 folds:
The borrower wants to retain the original asset for usefulness or speculation.
The lender wants to get the original value plus interest back.
If the underlying assets go up in value, no problem. The incentives are aligned. But when the underlying asset value go belly up now what?
And then you dont own the asset. Collateralization allows for one to retain the asset while getting a loan out against it. Why do people take out mortgages to do things like fund a business? Why not just sell the house? Because then they dont own the asset anymore.
The bond is posted at the time of the loan. If defaulted on, the bond is in the possession of the application (DAO).
The asset value is based upon a stablecoin and a consistent return. The volatility in this scenario isnt important because the bond, if collected, can be held to maturity, garnering the interest plus the original HBD.
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