> the worst one being that there's no human you can talk to when something goes wrong.
The worst part is that for a DeFi loan, you need something like 200% to 300% collateral (look it up, it varies but is usually around that amount). This makes it less than useless for just about all reasons people now get loans. The whole point of a loan is that you're willing to pay extra over time in order to have access to more funds at the present. With DeFi loans, you pay extra over time and have less access to funds than you would have had without the loan.
It only really makes sense for crypto gamblers, who are hoping that their collateral has insane appreciation that will offset the downsides. If anything, DeFi loans are less like actual loans and more like crypto gambling partnerships where one partner takes a position with lower risks and rewards and the other takes a position of higher risks and rewards.
>The whole point of a loan is that you're willing to pay extra over time in order to have access to more funds at the present
No, that's not the point of these loans at all. They are the equivalent of remortgaging your home to get cash. If need money for renovation and you have a lot of equity in your house you can borrow against it. They are doing the same thing with crypto. They don't want to sell their crypto because they want to speculate on it and they need money so they use it as collateral.
I personably think it's a very stupid idea to invest in something like crypto on credit. Lending your crypto to these morons looks like a pretty good idea if you can trust that the smart contracts doesn't have bugs. You get a stable and guaranteed >5% without all the risks of the stock market.
> They are the equivalent of remortgaging your home to get cash.
It's actually the opposite of remortgaging a home to get cash. Remortgaging a home to get cash is paying a premium to increase the amount of liquid assets available to you; this is the point of most loans. A DeFi loan is paying a premium and _decreasing_ the amount of liquid assets available to you. As you said, it's useful for juicing speculation, worthless for anything else.
> You get a stable and guaranteed >5% without all the risks of the stock market.
I think the long-term risks are actually greater than something like an index fund, since your collateral is all in crypto. The returns are also less than historical index fund returns.
A DeFi loan is paying a premium and _decreasing_ the amount of liquid assets available to you.
No, because from their point of view the crypto they put as collateral is NOT liquid. the entire point is do not sell them but somehow get cash from it.
The worst part is that for a DeFi loan, you need something like 200% to 300% collateral (look it up, it varies but is usually around that amount). This makes it less than useless for just about all reasons people now get loans. The whole point of a loan is that you're willing to pay extra over time in order to have access to more funds at the present. With DeFi loans, you pay extra over time and have less access to funds than you would have had without the loan.
It only really makes sense for crypto gamblers, who are hoping that their collateral has insane appreciation that will offset the downsides. If anything, DeFi loans are less like actual loans and more like crypto gambling partnerships where one partner takes a position with lower risks and rewards and the other takes a position of higher risks and rewards.