>The fact that you can take out a loan
You can take out a loan in crypto that's fully secured against some other crypto. It's turtles all the way down, and has zero relevance to what most people think about when they talk about taking out a loan.
You can take out a loan in crypto that's fully secured against some other crypto. It's turtles all the way down, and has zero relevance to what most people think about when they talk about taking out a loan.
If you have initial assets its an easy way to borrow against those assets. e.g. My bank wouldn't give me a loan against my eth as they don\t value the asset, instead I just open a maker vault and borrow against it in dai ($ stablecoin), and then sell that for € and deposit to my bank. problem solved.
I could be missing something, but it seems you're lending $50 worth of eth, rather than borrowing. Your net debt position is <0.
So, say you own 5 BTC and don't want to sell it because it's going "to the moon". You stake it as 200% collateral on a DeFi loan and get 2.5 BTC of liquidity you can use to buy some ETH.
What's interesting about this is that it allows the demand for coins (and therefore their value) to increase without introducing new (fiat) money into the system. I haven't done the research, but I'd be curious to know what portion of crypto trading is funded by these kinds of DeFi loans as opposed to "new" money.
In some 'we own you and command you to pay tribute to mighty rulers from what you produce' regimes, the loan avoids a sale and the resulting tax event. In my experience, the loan can be converted to fiat money.