{"id":8438,"date":"2022-09-28T08:15:40","date_gmt":"2022-09-28T08:15:40","guid":{"rendered":"https:\/\/mdr.foobrdigital.com\/?p=8438"},"modified":"2022-09-28T08:15:40","modified_gmt":"2022-09-28T08:15:40","slug":"the-point-of-secured-defi-borrowing","status":"publish","type":"post","link":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/2022\/09\/28\/the-point-of-secured-defi-borrowing\/","title":{"rendered":"The point of secured DEFI borrowing"},"content":{"rendered":"\n<p>In traditional finance secured loans generally use an illiquid asset (like a house) &#8211; something which isn\u2019t easy to sell quickly &#8211; to borrow a liquid asset, like money. In the crypto version of a secured loan, one liquid asset is used to borrow a different liquid asset, so what\u2019s the point?<\/p>\n\n\n\n<p>There are plenty of scenarios in which it makes sense to use crypto A as collateral to borrow crypto B:<\/p>\n\n\n\n<ul><li>You need short-term cash for a deposit on a new house or car, but don\u2019t want to sell crypto A and lose out on the long-term appreciation<\/li><li>You want to sell crypto but avoid capital gains tax so borrow a Stablecoin and convert that to fiat which doesn\u2019t count as a taxable disposal<\/li><li>You want to borrow a Stablecoin in order to yield-farm, or trade, generating returns that you anticipate to be greater than the interest rate on the loan<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Examples of DEFI lending providers<\/h2>\n\n\n\n<p>AAVE and Compound are two of the biggest DEFI borrowing and lending providers.<\/p>\n\n\n\n<p>AAVE\u00a0offers borrowing and lending across a number of different blockchains including Ethereum, Avalanche and Polygon. AAVE boasts the largest amount of TVL of any lending provider according to\u00a0Defillama\u00a0with roughly $4.9bn in deposited assets and $2bn in loans at the time of writing.<\/p>\n\n\n\n<p>AAVE has its own governance token, of the same name, paid as an additional reward to protocol users, which reached an All-Time High of $667 in May 2021 but has declined over 90% since.<\/p>\n\n\n\n<p>Compound\u00a0is an Ethereum-specific lending protocol listed as second in terms of TVL behind AAVE with around $2.7bn of deposits and $1bn in loans.\u00a0<\/p>\n\n\n\n<p>Compound has its own governance token, COMP, paid as an additional reward to protocol users, which reached an All-Time High of $911 in May 2021 but as with AAVE\u2019s token has declined by 90% as overall crypto markets have entered a bear market.<\/p>\n\n\n\n<p>1.139 COMP are distributed to users on a daily basis in proportion to their activity. This will continue until the COMP supply cap is reached or there is a governance vote to change this.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In traditional finance secured loans generally use an illiquid asset (like a house) &#8211; something which isn\u2019t easy to sell quickly &#8211; to borrow a liquid asset, like money. In the crypto version of a secured loan, one liquid asset is used to borrow a different liquid asset, so what\u2019s the point? There are plenty [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[457],"tags":[],"_links":{"self":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/8438"}],"collection":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/comments?post=8438"}],"version-history":[{"count":0,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/8438\/revisions"}],"wp:attachment":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/media?parent=8438"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/categories?post=8438"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/tags?post=8438"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}