Lending And Borrowing In DEFI Explained - Aave, Compound

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Finematics

Finematics

3 жыл бұрын

So have you ever been wondering how lending and borrowing works in DeFi? How are the supply and borrow rates determined? And what is the main difference between the most popular lending protocols such as Compound and Aave? We’ll answer all of these questions in this video.
Lending and borrowing is one of the most important elements of any financial system. Most people at some point in their life are exposed to borrowing, usually by taking a student loan, a car loan or a mortgage.
The whole concept is quite simple. Lenders a.k.a. depositors provide funds to borrowers in return for interest on their deposit. Borrowers or loan takers are willing to pay interest on the amount they borrowed in exchange for having a lump sum of money available immediately.
DeFi lending allows users to become lenders or borrowers in a completely decentralized and permissionless way while maintaining full custody over their coins.
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Пікірлер: 263
@Finematics
@Finematics 3 жыл бұрын
❓What do you think about lending and borrowing in DeFi? What is your favourite platform? 👍Hit the like button if you enjoyed this video 🐦Follow Finematics on Twitter ► twitter.com/finematics 💛Support Finematics on Patreon and join our Discord community ► www.patreon.com/finematics 📘Check out our FREE Guide to DeFi ► finematics.com/guide-to-decentralized-finance/
@bboyfaith
@bboyfaith 3 жыл бұрын
Very nice video, loving the contents! I think price feed data is key to leanding and borrowing in Defi, do you have a video out there explaining the different price oracles out there?
@nabhanrahman8429
@nabhanrahman8429 3 жыл бұрын
Thanks so much for these easy to understand informative videos. I would love to see a video about how earning platforms work, such as Celsius Network, Nexo and BlockFi, and what your thoughts are about their pros and cons. Thanks!
@stressrelief9597
@stressrelief9597 3 жыл бұрын
Comparing to these 2 i prefer Cream Finance. You should make video about it for sure. Furthermore, its partnership with large DeFi platforms such as Yearn.Finance, coupled with the growing demand for DeFi will keep the value of this DApps strong.
@eezeyx466
@eezeyx466 3 жыл бұрын
Nice video. Make a video on the best thing to come to defi bro, which is CREAM finance. A real nice lending and borrowing protocol. Moved from aave to cream and I've never regretted it. With its low MC my portfolio will definitely 10x in the nearest future.
@goldreserve
@goldreserve 3 жыл бұрын
I don't get it. e.g. Put money in a bank. The central bank insures the cash deposit against theft, bank bankruptcy. The bank manages counter party lending risk i.e. finding borrowers. Profits go to the banks' shareholders. Anyone with money can get some profit by owning some bank stocks. The bank has an advantage because it is creating money using fractional reserve banking. How does defi help? We have added new risks because economy is built on a myriad of complex smart contracts no one will understand.
@awrjkf
@awrjkf 3 жыл бұрын
OMG, this channel is amazing - a treasure trove of knowledge. I am Crypto investor, but for me the knowledge behind the tech is more important than investing itself.
@Finematics
@Finematics 3 жыл бұрын
Thanks! Great to hear the channel is useful :)
@gustavoosorio471
@gustavoosorio471 2 жыл бұрын
Yes, I just got into crypto and can appreciate the knowledge behind the fintech challenges and stages. Amazing. Praise God.
@dealclosert7301
@dealclosert7301 2 жыл бұрын
@@Finematics Hello, can you explain the withdrawal from lending on the compound defi
@mguarino28
@mguarino28 3 жыл бұрын
thank you for doing this explanation. I'll need to watch more of your videos and maybe watch this 3x more times to comprehend all the concepts.
@letsbye
@letsbye 2 жыл бұрын
5 Minutes, into the video, knew this is going to be an awesome one, grabbed a notepad. to take notes of all the new nomenclature .!! way to go...liked and subscribed.
@HHHGeorge
@HHHGeorge 2 жыл бұрын
Thank you for the video. Your video has given me clarity on how DEFI works and how lenders assets are safeguarded.
@asdasd-yr7wi
@asdasd-yr7wi 3 жыл бұрын
finally someone answered the DEFI question to me. nice channel!
@Finematics
@Finematics 3 жыл бұрын
thanks! Glad it was helpful
@finokemina
@finokemina 3 жыл бұрын
Men! you are simply golden. I hope it is gonna be shown in schools one day, so much well explained details! Thanks a million!
@Finematics
@Finematics 3 жыл бұрын
Wow, thank you! :)
@eliapaggi2668
@eliapaggi2668 3 жыл бұрын
@4:34 is like one week that I was looking for this answer, amazing content! Thank you
@LibaciFibs
@LibaciFibs 2 жыл бұрын
I appreciate the visuals just as much as your explanation. Really cool video.
@Finematics
@Finematics 2 жыл бұрын
thanks!
@rgwei3521
@rgwei3521 3 жыл бұрын
Great video! Mind making a video explaining risk from a lender's perspective?
@emilykayisit8400
@emilykayisit8400 3 жыл бұрын
Very clear and helpful, thanks a lot!
@anniewilliams4251
@anniewilliams4251 2 жыл бұрын
Your videos are very useful and provide lots of information. I have received lots of help through this post, please continue to share this kind of information. Thank you.
@iranastarr1598
@iranastarr1598 Жыл бұрын
I NEED TO WATCH IT AGAIN&AGAIN.
@Marketplacere
@Marketplacere 2 жыл бұрын
Great explanations! Excellent video. Very good presentation style and language used, clear speaking, good pausing, good phrasing.
@lukehansen6153
@lukehansen6153 3 жыл бұрын
Great job mate very informative
@AlainJeanBaptiste
@AlainJeanBaptiste 3 жыл бұрын
Truly nails it ! Thank you for making this easier to understand. So much possibilities that are available for people to create success in their lives now.
@JayS64
@JayS64 2 жыл бұрын
Damn I did not expect this video to be this good. With the added bonus of the video host sounding like a mix between Count Dracula and a DC Comic character, this was a great explanatory video of defi for beginners. Thanks
@crypto-insights
@crypto-insights 2 жыл бұрын
This video is amazing! It is so sad to see that videos saying "Bitcoin to 500k!" receive more views, than this video. This video is really really well done! I could not have done it better!
@md.shihabuddin5933
@md.shihabuddin5933 2 жыл бұрын
Thanks for your kind information.
@Lindsay49420
@Lindsay49420 2 ай бұрын
Awesome channel. Liked and subscribed one minute into the video
@meehai_
@meehai_ 2 жыл бұрын
Two questions: I have some questions: 1. why would anyone borrow a token ever? Especially since you need to have at least the amount you borrow. How do you avoid capital gains by doing this, as told in the video. 2. Why does in compound the exchange rate always goes higher? Why wouldn't it go lower than the initial 0.02 ?
@JamesGuerrero
@JamesGuerrero 2 жыл бұрын
Awesome video.... a true classic in the industry and referenced by everyone everywhere. you are a hero with a marker
@Finematics
@Finematics 2 жыл бұрын
thanks! :)
@bigword3744
@bigword3744 3 жыл бұрын
Dude, this channel is gold
@Finematics
@Finematics 3 жыл бұрын
Thanks! :)
@Vl7248
@Vl7248 3 жыл бұрын
You mean it’s bitcoin? I thought gold was dead
@semwalma5897
@semwalma5897 3 жыл бұрын
Just what I was looking for. Amazing work!
@Finematics
@Finematics 3 жыл бұрын
thanks!
@GabrielRubens
@GabrielRubens 3 жыл бұрын
Here before this channel goes viral
@omarciano42
@omarciano42 3 жыл бұрын
I was searching for this today! Thanks
@Finematics
@Finematics 3 жыл бұрын
you're welcome! thanks for watching
@marcelchuo
@marcelchuo 3 жыл бұрын
Turned on notifications for your vids, really, really high quality content! Keep it up!
@Finematics
@Finematics 3 жыл бұрын
Thank you! :)
@GrindGs
@GrindGs 2 жыл бұрын
Okay, as a German I have to listen to it more than one time. But really good stuff which you create!! Thanks
@toshbel
@toshbel 2 жыл бұрын
You're doing a great service. 💐
@Finematics
@Finematics 2 жыл бұрын
thanks!
@DYLTHEVYL
@DYLTHEVYL 3 жыл бұрын
This is hands down one of his best videos, and I’m only 7:41 in.
@Finematics
@Finematics 3 жыл бұрын
thanks! :)
@exveeex9153
@exveeex9153 2 жыл бұрын
Quality work 👌
@802sei
@802sei 2 жыл бұрын
Hi! Thank you for the great explanation! I just have one question. When I borrowed other crypt, I didn't deposit my aToken. Was it made as a collateral without asking me?
@bigjohn9544
@bigjohn9544 3 жыл бұрын
Great job, very useful thanks!
@Finematics
@Finematics 3 жыл бұрын
Thanks!
@edenbenovadia7432
@edenbenovadia7432 3 жыл бұрын
Love your channel!! Any chance you make a video on De-Cloud platforms such as AKASH network?
@pengjoon
@pengjoon 3 жыл бұрын
Amazing explanation 🔥
@Finematics
@Finematics 3 жыл бұрын
Thank you 🙌
@davidarmstrong7628
@davidarmstrong7628 2 жыл бұрын
I still don't fully understand it all...
@immmlate5164
@immmlate5164 Жыл бұрын
great video. for lending users, which platform's interest model is more attractive to these users? I can figure out how compound works, but for aave, I'm quite confused.
@rimworldlover
@rimworldlover 3 жыл бұрын
Your channel is amazing
@Finematics
@Finematics 3 жыл бұрын
Thank you! :)
@turgayo.3655
@turgayo.3655 2 жыл бұрын
THATS GREAT , TELL US MOAR . IT IS NEW AAVE AND COMP .
@amaljose1691
@amaljose1691 Жыл бұрын
I really like your content. Which software are you using for making these videos. Please reply
@Jolademi
@Jolademi Жыл бұрын
Nice content, DeFi is the next gem and Grizzly project is right call for Investors to earn steady profit.
@viquindan7647
@viquindan7647 Жыл бұрын
awesome video
@rsraleigh
@rsraleigh 3 жыл бұрын
Superb as always 👍👍👍
@Finematics
@Finematics 3 жыл бұрын
thanks!
@justbeingreal2299
@justbeingreal2299 3 жыл бұрын
Great video!
@Finematics
@Finematics 3 жыл бұрын
Thanks!
@Graceful_G
@Graceful_G Жыл бұрын
This is a helpful explanation of how lending and borrowing work in the decentralized finance (DeFi) space. It's an important aspect of the DeFi ecosystem and can offer users more control and transparency in their financial activities. I need more videos like this!
@Avicena-tf5uj
@Avicena-tf5uj 3 жыл бұрын
Incredible
@edwardscott8923
@edwardscott8923 2 жыл бұрын
Great explanations! Excellent video. Can you make a video about Ramp Defi? Based on my research they have reached $61M TVL so their customer value is evident. Maybe you can spare some time for this platform! Thanks!
@andrewkolansky5348
@andrewkolansky5348 3 жыл бұрын
Very nice video 👍
@Finematics
@Finematics 3 жыл бұрын
thanks!
@Francotujk
@Francotujk 3 жыл бұрын
Good explanation! I have a doubt... if al the token suppylers retire their deposits (claim the deposited token) what will happen? How the protocol pays to all the lenders?
@hanelyp1
@hanelyp1 2 жыл бұрын
If it follows classic banking, the collateral is sold to recover the owed value. Retiring and destroying the token defeats that.
@onteractive6688
@onteractive6688 3 жыл бұрын
I would like to know exactly how is the exchange rate is set with the supply / demand ratio
@AlainJeanBaptiste
@AlainJeanBaptiste 3 жыл бұрын
Aave, compound or celsius for borrowing or for getting better interest rates. Which one do most people suggest is better?
@smoldushi
@smoldushi 3 жыл бұрын
Can you get liquidated if you don't pay back your borrowed capital + accrued borrow APY within a specific timeframe? Can you get liquidated when providing ETH collateral and borrowing DAI?
@javierortizmir7873
@javierortizmir7873 3 жыл бұрын
I cannot believe this video has less than 400 likes!!!!
@oreskovic9
@oreskovic9 3 жыл бұрын
Just got a quick question about borrowing on AAVE. For example, if I put 1 ETH as collateral and I take out a loan of 0.5 ETH, does moving of ETH price have any effect on liquidation since this is well below liquidation level (by Aaves formula). Great video btw
@onekycarscanners6002
@onekycarscanners6002 3 жыл бұрын
@Duy Huynh what of fees haha this guy is rekt.
@johnkeller4201
@johnkeller4201 3 жыл бұрын
Can you please do a review of Flamingo (FLM)? It’s a DeFi project backed by NEO and it’s founder. Flying under the radar at the moment but could be a top 20 coin.
@luther7541
@luther7541 3 жыл бұрын
lending works really great for emergency expenses while being bullish to crypto.
@bperez8656
@bperez8656 3 жыл бұрын
What do you mean by “emergency expenses”
@luther7541
@luther7541 3 жыл бұрын
@@bperez8656 stuff like repair your car, or hospitalization. You either sell your crypto(pay tax, and stop the gains) or borrow money (no tax, continue to gain on upside).
@bperez8656
@bperez8656 3 жыл бұрын
@@luther7541 so you’re saying lending works great for the borrower to not have to sell their crypto. Thought you meant it helped the lender with emergencies and I was confused.
@onekycarscanners6002
@onekycarscanners6002 3 жыл бұрын
In a bear market all borrower's will get rekt. So what's the point?
@hlebalbau9611
@hlebalbau9611 2 жыл бұрын
@@onekycarscanners6002 you can borrow in usdc
@tommyimmanuel1357
@tommyimmanuel1357 Жыл бұрын
AAVE is my favourite
@soulkeeper1392
@soulkeeper1392 2 жыл бұрын
But where does the exchange rate change per each block comes from? And who decides on its magnitude ?
@alexanderschnur7660
@alexanderschnur7660 3 жыл бұрын
Can i sell e.g. cETH after borrowing it? If so what exchange or dex can i sell it on?
@jaspm
@jaspm 3 жыл бұрын
please compare DEFI vs CEFI lending ka
@user-ir8pb1hh6l
@user-ir8pb1hh6l 3 жыл бұрын
Great video ! Could someone explain to me what's the point of AAVE & Compound coins if you can make smart contracts with other coins like ETH for example.
@Finematics
@Finematics 3 жыл бұрын
Thanks! Check out our video on Aave. Their token is basically used to secure the protocol and for governance.
@onekycarscanners6002
@onekycarscanners6002 3 жыл бұрын
@@Finematics that does not answer the question. You can use other tokens without the risk of liquidation, but then no rewards, no pooled funds/liquidity and high risk of impearment loss.
@aldoasad
@aldoasad 2 жыл бұрын
Aave token is a 'GOVERNANCE TOKEN' A crypto token that includes voting power. Governance tokens let users determine future rules and goals as well as changes to the blockchain architecture.
@ItsJeffbeloved
@ItsJeffbeloved 2 жыл бұрын
So far, from this video, sounds like I need to start with AAVE
@JH_CHO
@JH_CHO 3 жыл бұрын
Thanks for the great video. $uni farming was just over and I'm looking for the best place for $WBTC and $ETH. But the APY of both AAve and Compound are too low compare to Celsius network, however I'm already using Celsius and don't wanna put all my crypto in the same place, plus I'm not a big fan of Blockfi and etc... Hmm... Any idea?
@Finematics
@Finematics 3 жыл бұрын
SushiSwap just opened liquidity mining on the same pairs as Uniswap and this is where around 45% of Uniswap liquidity already migrated.
@JH_CHO
@JH_CHO 3 жыл бұрын
@@Finematics Thanks. I'll look at it. I don't have good vibes for Sushiswap though. Much appreciated!!
@Finematics
@Finematics 3 жыл бұрын
@@JH_CHO yes, of course do your due diligence. Sushi is definitely riskier and less established than Uniswap, but they've been using the same contracts for their AMM and liquidity mining rewards with no problems for a couple of months already
@JH_CHO
@JH_CHO 3 жыл бұрын
@@Finematics Got it. Sushi is not the same one I remembered anymore. Thanks again.
@BlockHarvest
@BlockHarvest 2 жыл бұрын
Anchor protocol
@BenBethelAZ
@BenBethelAZ 3 жыл бұрын
Fascinating... It would be interesting to borrow at negative rates if you use coin as collateral that also increases in value while paying the interest on the other coin, the arbitrage between appreciation on coin held but used as collateral and rate paid could be possible.
@onekycarscanners6002
@onekycarscanners6002 3 жыл бұрын
What do you mean by negative rates and how would you calculate it thanks I like this idea. Waiting for your answer.
@BenBethelAZ
@BenBethelAZ 3 жыл бұрын
@@onekycarscanners6002 short answer... Let's say you have a mortgage rate at 3% for your home through a big bank and put $20k down on a $100k 30 year mortgage for a home (just an example). Well with inflation on year 30 your mortgage rate is far less than 3% adjusted right? Also if you sell your home for $600k in 30 years you've made $500k in gains, so what was the cost of those gains? Less than 3%. Now what if you could get that loan for less than 3% ... In the DeFi market it'll be far less... Now if you could get that loan while using cryptocurrency as collateral, but still hold that collateral, would that increase in value in addition to the value of your home? We hope so. Therefore the rate of increase in investment means your cost for the money borrowed was truly a negative rate... You made money right? This is why I always tell people to never pay off low interest debt if you earn a higher rate of return on another investment. This is why it's okay to pay 3% to 10% for a loan, as long as you're investing in something with a rate of return higher than the rate at which you borrow. Even a student loan (although I'm against getting a degree for 99% of the population) can be looked at as worthwhile if you're getting a return out of it. Same with the government taking on debt... Or a factory or a business... As long as there is a return on the cost of the money borrowed, then borrow away. DeFi will just democratize this and make it a lot faster and cheaper to obtain. Sadly I know white privilege, I experience it, I know I can pick up my phone and call some old white dude at a bank who I've got a relationship with and get a loan for $25MM pretty easily, but it takes forever and there's a lot to navigate and this pulls me away from core business operations which loses money and opportunities for others. This has got to stop, we've got to change, we've got to give everyone a fair shot. The imbalance in the financial world made me nauseous enough to just stop working at 47 and focus on enjoyment of life. I'll be 50 in 2 months. All of us need to move to more enjoyment of life, time is the greatest currency.
@eduardowestphaldacunha8761
@eduardowestphaldacunha8761 2 жыл бұрын
Great video! I have one question: in the Compound example, why is it safe to assume that the exchange rate between cETH and ETH can only increase with each Ethereum block? Couldn't it decrease any time?
@KevinKamto
@KevinKamto 4 ай бұрын
It will only decrease if demand decreases, which won’t happen anytime soon
@xs-bk1ql
@xs-bk1ql 3 жыл бұрын
would like to see how flashloan attack hack works, can you make a video to explain its mechanism? Thank you.
@Finematics
@Finematics 3 жыл бұрын
yes, it's on my list of topics already, thanks for your suggestion! :)
@xs-bk1ql
@xs-bk1ql 3 жыл бұрын
@@Finematics Thank you! your youtube is very informative. I really love it. If I can make another proposal? Basis Cash and ESD seem have a better mechanism than AMPL for generating stable coin. If it is possible for your to make a video to explain this mechanism? Thank you.
@Psta999
@Psta999 3 жыл бұрын
Hi, so i was just trying for the first time to use Compound. I tried to supply my $340 worth of Comp (0.71) as a collateral but the gas fee is $80 (worth of ETH). And I am like wtf? Am I doing sth wrong there? How could anyone possibly profit using Compound if gas fees are 24% of what i want to supply? Any info would be much appreciated.
@nikolamilivojevic1942
@nikolamilivojevic1942 3 жыл бұрын
gas fees are high right now on the ethereum network because it is clogged up. this will be fixed in the future (hopefully in the next few months)
@onekycarscanners6002
@onekycarscanners6002 3 жыл бұрын
You are a Poor man, Eth blockchain is for whales. Move over to Binance centralized smart chain where you may have a chance. Defi is still a kind of scam. Be very careful. Hodl your Crypto if you don't know what you are doing.
@Psta999
@Psta999 3 жыл бұрын
@@onekycarscanners6002 i have binance acc and i have been spot trading profitably so far. Wanted to give yield farming a try to understand it, i cannot drop more money in there until i learn it with small bankroll. Will wait for gas fees decrease
@landon.
@landon. 2 жыл бұрын
@@nikolamilivojevic1942 💀
@smoldushi
@smoldushi 3 жыл бұрын
By when would you have to repay the interest? only upon wanting to unlock your collateral or do you have to pay the borrow APY monthly to prevent getting liquidated?
@hanelyp1
@hanelyp1 2 жыл бұрын
If I understood correctly, you'd have to keep the total owed below the collateral liquidation point.
@Galaxia53
@Galaxia53 2 жыл бұрын
So when there are a lot of borrowers on ETH and few lenders the APY would increase but when there are a lot of lender and few borrowers the APY would decrease right? Edit: This seems to be the case. Why do so few people want to borrow Ethereum? There are other not stable coins with a much higher APY so it's probably not or at least not just the fact that Eth is not stable.
@swikritichaudhary5584
@swikritichaudhary5584 3 жыл бұрын
Is aave related to easy fi
@Del-Canada
@Del-Canada 3 жыл бұрын
I own some crypto but I really don't understand any of this. I wish I did but I just don't comprehend it. I could probably have a pretty good life if I could just get my mind around all of this. It's overwhelming.
@sidhantkumar4903
@sidhantkumar4903 2 жыл бұрын
How did you arrive at conclusion that borrow APY is higher than Supply APY, is it because the protocol also has to earn some profit?
@ebuks4ever
@ebuks4ever 3 жыл бұрын
This video is just timeless... Thanks again.... Pls which platform would you recommend for BSC?
@YounTub3
@YounTub3 3 жыл бұрын
Man, don't use BSC, it's a fake DEX; if Binance goes off, the BSC goes off too. Use Polygon instead, AAVE is running on Polygon. Fees are close to 0$ and it's really decentralized, these are the main advantages of Polygon over BSC.
@theshepard22
@theshepard22 3 жыл бұрын
Can someone explain why you would want to lend versus borrow? Also, are are funds at risk when putting them into a defi platform, can they disappear? Or do we only have to pay the necessary percentage to get ahold of our funds? This model is hella confusing. It's hard to tell which platform is best. I think I want to lend.
@speakingfacts3931
@speakingfacts3931 3 жыл бұрын
You lend you get interest for lending your coins
@Lolmonculloll
@Lolmonculloll Жыл бұрын
Does somebody has a good plateform/Dapps to try it?
@munoncode
@munoncode 2 жыл бұрын
If i lend 100 usdc and then borrow $80 worth of eth, can i get liquidated if the price of eth increases?
@DanielPerez-he4xz
@DanielPerez-he4xz 3 жыл бұрын
I still don’t understand the concept of borrowing if you have to lend more than what’s worth? Love the videos! I’d rather just sell for a stable coin or btc
@onekycarscanners6002
@onekycarscanners6002 3 жыл бұрын
You lose leaverage, take on impearment loss and pay your capital gains tax. Now how rich are you duhh!
@ALIANZASTAR
@ALIANZASTAR 3 жыл бұрын
if you sell you pay capital gains tax, if you borrow you have cash without having to sell your property (your cryptos) Imagine you have a house and want cash you could sell it or you could simply borrow against it putting your house as collateral, that means you have cash on hand and yet keep the property with you, not to mention that debt is tax free, and also you get cashback for borrowing in defi, that. cashback is worth more in many cases than the interest you pay on the loans and that means that you can earn money from borrowing,
@NakedFlop
@NakedFlop 2 жыл бұрын
@Tharsh Most wealthy borrowers use the loan to invest, so the interests on the loan are also deductible.
@obitonanso5281
@obitonanso5281 2 жыл бұрын
Can you make a video on Wanchain, wanlend, zookeeper &...
@andreadp7919
@andreadp7919 3 жыл бұрын
When $Neutrino $Nsbt explanation?
@Erictraiven
@Erictraiven 6 ай бұрын
How much is the interest rate?
@IsaacNewton80735
@IsaacNewton80735 2 жыл бұрын
Is D5?
@DonnateloComedia
@DonnateloComedia 3 жыл бұрын
Please make review about idle.finance
@suchacrypto6088
@suchacrypto6088 3 жыл бұрын
What about if you need a mortgage loan and you do not have any collateral to provide? How Defi can be useful here rather than a traditional bank loan which accepts monthly payment? Maybe borrowing cryptocurrency based on a monthly payment will be available when our job information exists in the blockchain and becomes accessible through oracles for lending platforms. Who knows...
@samirtahir3756
@samirtahir3756 3 жыл бұрын
Chainlink
@ryanjohnsonhunt
@ryanjohnsonhunt 20 күн бұрын
Given the fact that both Celsius and Blockfi have now collapsed, one of my takeaways is that is more of a long-term solution to consumer finance in the crypto space
@navin346
@navin346 3 жыл бұрын
What will happen if the underlying value of Crypto fells below the borrowed value ?
@ALIANZASTAR
@ALIANZASTAR 3 жыл бұрын
Either you deposit more tokens or you pay back the debt in time, if you are not fast enough then the system will liquidate the collateral
@tomcvijanovic6900
@tomcvijanovic6900 3 жыл бұрын
This all makes sense, except for why people borrow from it? If they need to deposit at least that in collateral, they don't want to turn coins to cash to realize capital gains? That's the only sensible reason I could see for doing it but surely that cant account for the sheer volume going through these platforms?
@LisianeWinkler
@LisianeWinkler 3 жыл бұрын
Thank you for the great explanation! What I still don’t get and hope you can help me with, is to understand the use-cases of why someone would borrow crypto. I still don’t understand the need of the service :-(
@Finematics
@Finematics 3 жыл бұрын
Imagine you invested your money into ETH and you believe it will go up to $1000 per coin. A tough month comes and you have some unexpected expenses that you have to cover and you already run out of USD (assuming this is your currency). Now, instead of selling your ETH, paying capital tax gain on it and risking that ETH price will go up after you sold it, you can take a loan in USD-based stable coin with ETH as your collateral. Now you can pay your expenses by withdrawing borrowed stable coins. In the next few months you received your salary and you can use some of it to pay of the USD-based stable coin loan. During that whole time you had a full exposure to the initial amount of ETH. Of course, there are multiple more complicated reasons such as borrowing stable coins to buy even more ETH (leverage) or borrowing other coins to use them for yield farming. I hope this helps.
@LisianeWinkler
@LisianeWinkler 3 жыл бұрын
@@Finematics Thank you so much for the explanation! appreciate your time and feedback! :-)
@Waterfound
@Waterfound 3 жыл бұрын
​@@LisianeWinkler Ask and you will be answered. "I still don’t understand the need of the service" if you find a reliable and efficient way of generate profits or financial gains you could profit way more by simply applying leverage. McDonalds was built on 3 big long term borrows. The top tech companies are levered from 100% to 350%
@LisianeWinkler
@LisianeWinkler 3 жыл бұрын
@@Waterfound hey Vinicius! thanks a lot for the feedback! I understand the principle of leverage applied for companies, as you are raising capital to grow, scale and deliver. Running a stock evaluation seems to be much easier than crypto somehow. I struggle with the concept of leverage as an investor in crypto mostly due to its volatility, *but mainly* for not understanding how to evaluate and set the target price for all the different crypto currencies. I just find a bit kamikaze to borrow in order to invest, specially when the price target is more of an assumption than as in a simple sales projection... but it may be as well that we now have to change how we provide invesment evaluations... there I must say I am lost! :-)
@vincentvainunska183
@vincentvainunska183 3 жыл бұрын
@@Finematics thank you for the great content and taking the time to share your knowledge. may I ask how you can withdraw borrowed stable coins? and how do you use them to pay things IRL?
@developer6133
@developer6133 2 жыл бұрын
I think you missed debToken when borrowing in Aave.
@user-or7ji5hv8y
@user-or7ji5hv8y 3 жыл бұрын
How does it avoid licensing regulations on lending?
@onekycarscanners6002
@onekycarscanners6002 3 жыл бұрын
How do you regulate a protocol. Throw away your centralized mentality and welcome to the decentralized universe. Haha...
@maigematthews5620
@maigematthews5620 2 жыл бұрын
How does this lending structure work against high gas fees? Ex.: I lend $100, but the gas fee is $76. Is there a way to work in the gas fee as part of the interest earn from lending? Because I am not responsible for high gas fee, nor can I change it. So since it is a factor out of my control, shouldn't be a factor for the borrower, not the lender?
@arcticssr
@arcticssr 2 жыл бұрын
Gas fees are your problem only.
@NhanTran-ks1cd
@NhanTran-ks1cd 3 жыл бұрын
aave, compound, maker will be growing to the level of JP Morgan, Bank of America, CitiGroup
@carlossaysroar
@carlossaysroar 2 жыл бұрын
Flare will flatten them
@Beny123
@Beny123 2 жыл бұрын
Yep! They’ve probably put a price on these DeFi projects’ heads already.
@galimir
@galimir 2 жыл бұрын
I still cant get it.Why I need to give 5 DAI for example(as collateral),in order to borrow 5 DAI,when I can just use my original 5 DAI? I dont get it? Can someone explain to me please?
@NakedFlop
@NakedFlop 2 жыл бұрын
There is no point in borrowing dai for dai. It will usually be a stable coin for a coin on which the person has a huge capital gain (so not a stable coin).
@ivannikonov3047
@ivannikonov3047 3 жыл бұрын
Thanks for the content! Tho only issue is I don’t get why people borrow so much
@obusobus5157
@obusobus5157 3 жыл бұрын
People borrow so much for big business purpose
@moddkilla
@moddkilla 3 жыл бұрын
I feel like I’m investing in cutting edge technology with the compound tokens.
@anav587
@anav587 2 жыл бұрын
You are
@moddkilla
@moddkilla 2 жыл бұрын
@@anav587 Indeed
@tijofred
@tijofred 2 жыл бұрын
Si its basically margin in stock market?
@NakedFlop
@NakedFlop 2 жыл бұрын
Yes
@acextensionsinc
@acextensionsinc Жыл бұрын
🙏🏼✨🙏🏾
@12345bookworm12345
@12345bookworm12345 3 жыл бұрын
is the collateral in aave or compound blocked? or you can still use it and if you lose some you get liquidated?
@ALIANZASTAR
@ALIANZASTAR 3 жыл бұрын
the collateral has to stay locked until you pay your debt, if you don’t pay the debt it gets liquidated
@user-nm5tn7td5b
@user-nm5tn7td5b 2 жыл бұрын
The Big problem in flash loan gas Fees more than profits
@sain120
@sain120 3 жыл бұрын
What happens if the collateral value drops dramatically? The borrowers would just run away with the money and never pay back the loan
@vegonomia-nosprotegendodoc9011
@vegonomia-nosprotegendodoc9011 3 жыл бұрын
It gets automatically liquidated when falls close to the ammount borrowed.
@ItsJeffbeloved
@ItsJeffbeloved 2 жыл бұрын
that’s why LTV is factored in, the collateral would get liquidated towards the LTV amount which would be your max allowable to borrow anyway. If your borrowed amount is less than LTV then it would get liquidated at borrowed amount
@JDiculous1
@JDiculous1 3 жыл бұрын
Hey love your content, this knowledge really is gold. One suggestion though regarding speaking - it sounds like you pause every 3 words or so, which sounds very jarring and repetitive/robotic after a while. If you could speak a bit more fluidly/naturally without pausing so often, then I think it'd be way easier to listen to. Anyways thanks again for making these as I know they take a ton of time. Definitely one of the best crypto channels I've found so far. Keep it up!
@Finematics
@Finematics 3 жыл бұрын
thanks for the feedback
@iranastarr1598
@iranastarr1598 Жыл бұрын
I am new user. I need a big loan from DeFi. last one week I dying with it by confused. I want to use digital asset exchange. Where need to start I don't know. no any contact or customer services to get me help ASAP. I need to add Etheric on metamask?? how? I any understand the features of the process. PLEASE HELP ME ANYONE ..
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