So the killer use case is a scheme to avoid capital gains taxes? Sounds about right.

You realize elites are already doing this with USD. It's not unique to crypto.

I think in the past someone mentioned about under-collaterized loan. It's based on your reputation. The idea is you use your Ethereum account to do activities. Based on these activities, people could give you a loan. Such activities can be something like answering questions (imagine Stackoverflow but the authentication runs on Ethereum).

Okay, but it seems like the reputation evaluation isn’t automated, so this is more like fundraising?

You can do loans with no collateral at all if you use flash loans.

Okay, but that seems like a pretty small niche? Most people don’t borrow just to save money on taxes on their cryptocurrency gains.

They might borrow to hold on to their asset's appreciation.

You could lock in the gain by selling at the current price, so that still sounds like tax avoidance. Or possibly leverage, if you think the price will go up more?

Yes, you could leverage, you could hedge yourself by buying stocks. Or you could just spend the money on whatever else you want.