Ethereum Isn't Fun Anymore

Re:Ethereum Isn't Fun Anymore by rspeele on Monday February 22, 2021 @11:50PM (#26233929)

Is what I outlined still basically correct in terms of describing the utility of an overcollateralized loan? That is: Use crypto for collateral to borrow stablecoins, to buy more crypto, to make profit (hopefully exceeding loan interest) when the crypto price goes up.

Or do I have that all wrong? I really am not sure that I grok how this works, at all. I'm trying to figure out what is going on in this space and you seem to know a lot more about it than I do. I couldn't figure out another good reason to use an overcollateralized loan but it's clearly something people are interested in and using as a selling point for DeFi.

What actually happens if the borrower defaults on the loan? Do they "just" lose their collateral, or can they be held to account for the DAI somehow too?

[ Parent | on HN ]

Re:Ethereum Isn't Fun Anymore by gh55 on Tuesday February 23, 2021 @05:33AM (#26235716)

If loan repayment is not made, or the collateral falls in value sufficiently that the loan becomes undercollateralized, the collateral will be sold to cover the outstanding debt. The outstanding debt can be invested on a new business, stocks or gold - its not restricted to buying digital assets.

[ Parent | on HN ]