Defi loans it makes no sense

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I don’t understand why there are lending platforms because when people ask for a loan, they receive less than what they leave as collateral, the reason for existing and to be liquidated and to be without what they left as collateral.
it was much easier and cheaper to buy DAI with euros or dollars and with those DAI do what they want to do without the risk of being liquidated, basically the ethereum serves to keep our bitcoins and DAI to keep our ETH lol
good business model for intermediary who were eliminated from distribution chains lol
in defi I only see 2 or 3 interesting coins the rest is garbage and borrowing is for suckers.
That is why there are so many projects that are very profitable for those who make them, whenever someone wins someone loses … nice but the loans do not solve the problems of the world I see no use but profit at the expense of the unfortunate people who use loans

Getting a Dai loan allows you to get liquidity that you can use provided you are willing to pay the interest rate. This means you can get extra capital to use on an arbitrage opportunity if you see one. For instance, if you had a good chunk of Eth during the March crash you could then put that into maker to get a Dai loan, which you could then move to a DEX and trade for MORE Eth. When Eth tripled in price you could then take a small amount of the Eth you have on the DEX, trade it to Dai and then close out your CDP on Maker, so now you have more Ethereum without needing to use a FIAT onramp.

If you really want to understand this take the Defi101 course and play around in the defi space (I suggest you use the test net because fees are a ballache). You’ll learn a lot more by playing in it than by standing outside trying to understand it.

Obviously things went a bit wild and weird over the last few months with the food related tokens, but that doesn’t mean the whole space is useless. If it didn’t solve a problem, it wouldn’t have become a bubble in the first place

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I understand perfectly and I already did the defi101
I don’t understand the benefit of the loans
because you don’t buy directly with euros or dollars, the loans don’t make any sense
this became a bubble due to greed is not because it serves any purpose

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But you could say that about any loans…? people could want a loan for a lot of reasons, and overcollateralised loans have existed for a very long time, so there are clearly reasons to get this type of loan. Plus a Dai loan through the Mker protocol currently has an interest rate of 2% which is waaaaaaay less than any bank loans I’ve seen, and you won’t be rejected based on credit history. You could easily take this Dai to a centralised exchange and change it to Fiat which you could take out and use in the real world if you needed.

but in the real world if I ask the bank for 5000 I will not leave it as a guarantee 5500, just lend the money, of everything I saw on blockchain this is the only thing that I find useless, alias it is good for the owners of these systems but for those who use I don’t see any use, because this guarantee can be used to buy in euros or dollars and there is never the risk of being liquidated due to price fluctuations

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But in the real world you CAN go into a pawn brokers and get a loan for 5000 by handing them a gold ring worth 7500 that you really don’t want to sell but you’ve got bills to pay. You use that to pay off your bills at a much lower interest rate than you’d get from a bank (assuming the bank would even give you a loan) and then when you next get enough money to pay off the loan you go back to the brokers and get your ring back.

Just because you have no use for it doesn’t mean it isn’t useful to someone else.

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what is important is not whether I use it or if other people use it, what is at stake is that it does not make sense because people could buy directly with fiat money instead of leaving a guarantee and still running the risk of being liquidated, no makes sense

People aren’t dumb though, the majority will only use it if they see that it is of benefit to them, and that it is the best option. You’re still making the assumption that they can get fiat without selling their crypto which they won’t want to do if they are bullish. If they have no income or savings and they have a bad credit history they won’t have the option to use fiat.

There’s also a key thing that i think you may be missing, which is that Maker will not necessarily sell off ALL of your collateral if you are liquidated. They will sell off enough collateral to cover the debt (+the liquidation penalty) and then whatever remains will be available to you to use again.So you’ll only lose all of your collateral if the value of that collateral falls dramatically very quickly (like in March).

It’s also a necessary stepping stone to undercollateralised loans (like banks give). without overcollaterlised loans it is very hard to make an ecosystem with undercollateralised loans without there being a huge amount of risk in the system.

I understand the need for a guarantee because if no one paid, I understand that it is used by many people and I understand all this, I still don’t understand why they don’t use the fiat money they already have to buy what they want instead of making loans, you don’t have to answer, people are like blind greed

But you’re assuming they have fiat money to spend on the stuff. Imagine “Steve” lost his job and hasn’t managed to get another one yet. he’s down to his last $50 but is confident he can find a new job in a month or 2. He has a mortgage/rent that needs paying in a week though, so he needs to find enough money to pay it. He has a load of ETH that he bought a year ago. He could sell it and that would make him money to pay the rent, but he expects the value of it to go up considerably in the future, so he really doesn’t want to sell it.

So he decides to lock it into Maker, mint some Dai and then change the Dai into dollars through whatever exchange he uses. He can pay his mortgage/rent and doesn’t miss out on any increase in value of his ETH, which can then allow him to borrow more Dai if he wants, or he can use the dollars he earns from his new job to buy Dai and pay off his Maker loan, releasing his ETH.

Loans don’t just exist because people are greedy. If loans didn’t exist there would be faaaaaaar less innovation and invention in society. They don’t exist just to be used for consumer spending or gambling on shitcoins, but if people can manage that risk then there’s no reason they shouldn’t be allowed to. If they can’t manage the risk but do it anyway, then they end up in rekt-city.

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i respect your vision,but this is your vision,its ok

I had a similar question about these loans and i think it clears it up a bit for me. I appreciate the discussion

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its cool to know i am not alone lol

well said that was an awesome explanation i was in agreement with the other guy until that post!

very enlightening

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