Overcollateralized loans are just the beginning. I'm sure other entities will partner with Aave (read: integrate to Aave) and offer loans themselves, using Aave as the bank. 3rd parties (centralized at first, but later decentralized) that can do credit checks, etc. DeFi is just over 1 year old, and you expect it to have all the services as our existing financial system? LOL! In one year Aave has gone from 0 to 18 billion USD locked in its protocol, a truly amazing achievement. And shows the market need.SlowMovingInvestor wrote: ↑Tue May 11, 2021 12:34 amAre you seriously asking that question ?Prahasaurus wrote: ↑Tue May 11, 2021 12:18 am
I can borrow from Aave now, no KYC, the process takes about 5 minutes. Why do we have a credit card industry when it's just so easy to borrow at 1-2%? Are you serious?
I have no doubt Bogleheads have access to cheap capital if they are willing to spend months filling out the forms. And hedge funds have access to even cheaper capital. It's just the 99% of Americans that don't seem to have those options. And 99.99% of the rest of the world.
The reason people borrow at higher rates from credit card companies is that they don't have shares and margin accounts to get loans (*). Or they don't have homes they can get HELOCs against. Months filling forms ? Changing my account into a margin account at Ibroker was approved in maybe 2 hrs. I've never actually got margin from them, but I think it's instant from this point on.
The 99 % (actual I'd guess it's significantly less than that) of Americans or 99.9% of the rest of the world who don't have those options also DON'T have crypto to put up as collateral. Margin loans (which ARE collateralized and can be instantly liquidated) can charge much lower rates because they have collateral that can be priced and liquidated instantly. And Ibroker's margin rates are indeed 1-1.25%.
(*) It's possible that some share owners don't realize they can get margin loans against them or don't want to take the risk of liquidation. But the problem then is lack of financial literacy or risk taking appetite -- which would prevent them from using crypto collateral.
What has been built over the past year (granted, the development typically started around 2017/18) is just unbelievable, and I can't wait to see how it all evolves in the coming decade. So glad I'm an early investor in the future of finance!