A great post by @spinvest about collateralized loans in the future and how they can radically alter the landscape of lending. This is something that I agree with and can see it happening. As we move past the excessive yield farming, we can see legitimate opportunities within DeFi.
Check this out and give it a comment.
https://leofinance.io/@spinvest/how-the-next-generation-will-build-wealth-and-not-debt
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I just saw that pop up on Hiveblocks and had to read it. With a crypto loan, not only is everything easier, but you have the benefit of not putting your credit score at risk. This is going to shake things up for sure!
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Yes and you end up controlling things because if you are near the time where they will call the loan, you can always add more collateral. It could be built in like overdraft protection.
Plus, the underlying asset could keep appreciating while you are paying back the loan. Imagine being able to do that with a lot of things.
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Or the asset could deprecate a bunch and you are going to need a whole ton of collateral. I wonder how well this system works for the people who FOMO and buy in at the top.
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The value of the asset isnt really an issue I dont think because the collateral is not the asset. Thus, in the example, the Bitcoin price is the variable.
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Yes but if you were already taking the loan near the max and Bitcoin drops, you have to add more collateral. So what happens when BTC gets the normal 50%+ drops at the end? I find it is going to be tough for people to make up the difference sometimes.
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Yes well that is why they do not give 100% on the BTC.
So in the example, $200K in BTC collateral for a $100K house. If the price drops 50%, then they either be liquidated or they will have to put up more BTC as collateral. The house could have gone up or down but that isnt really part of the equation.
If they have no more BTC, the collateral is taken and the house is still theirs.
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Do you think its possible that the current system will try to incorporate this into the existing credit system?
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I wouldn't be surprised, once they begin to see it as a threat to their business.
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It might but I have a feeling it will be pushed from outside the existing financial system. This is really going to alter how the establishment is affected.
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I saw this in feed earlier today and I think the yields will still be better than the traditional banking system.
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