Complexlity
@complexlity
In the web3 space, I don't understand why people `borrow`. In my experience using some of these platform. You have to provide 200% collateral on one currency to borrow another. And if you cannot repay, you risk forfeiture. In physical world, the reason you have collateral is you still own it. Imagine selling you stock or car to purchase something. You can not simply buy it back. But in crypto, isn't it better to just convert your 500k USDC to WETH and than borrow 500K WETH while locking 1M USDC as collateral. What am I missing here?
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KiddⓂ️etro 🎩
@lorenzo-007
hmmm this is an interesting convo currently developing and studying on borrowing money in the web3 space. but i'm confused. To me everything about borrowing on web3 seems flawed to me and makes no sense. maybe you can explain with your experience like why borrow in another crypto currency why risking your money in forfeiture and also isn't the platform at loss if they ain't able to return the money and also isn't there gonna be interest rate depending of time of payment. In the physical world it different based on the fact you can put some thing you own as collateral.
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Complexlity
@complexlity
So I've used AAVE (app.aave.com). You supply some token and you can then borrow on the other end. There's also @morpho (app.morpho.org). Similar idea but I've not personally used. On aave, you need at least 200% collateral. I've also done something similar on Binance margin trading. Not sure it's up to 200% but similar idea. Yes, there's interest rate. The idea of 200% is, the interest will `eat` into your collateral until you pay back. The only reason I can think of why people borrow is, Imagine you think DEGEN will increase in value but you need MOXIE to buy fan tokens that was launched today. You can supply $1000 worth of DEGEN and they borrow $500 worth of MOXIE to buy someone's fan token. When the fan token has increases in value (assuming someone launches and you think it's under valued at launch), you can sell the MOXIE for profit and pay back the loan (with the agreed interest).
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