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DeFi Lending Intro |
Introduction to DeFi Lending |
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Founder Vesu Lending President DeFi Collective Lecturer ZHAW School of Engineering
- I could earn while HODLing
- I could borrow more crypto
- Directly from my wallet
- Through the internet
- Anonymously
- Globally
- 24/7/365
Loan-to-value (LTV) measures value of debt vs collateral
Health factor (HF) measures liquidation risk
Liquidate position if HF<1!
- Public (everyone can be a liquidator)
- Liquidators make profit
- Highly competitive market dominated by MEV-bots
- Capital-neutral liquidations use flash-loans
- Borrow any amount without collateral
- BUT: repay in same tx
- IF NOT: entire tx reverts
- Zero counterparty risk
- Used for liquidations, arbitrage, leverage, position management (eg collateral swap, UX)
- What is the value of a position's collateral and debt?
- Price oracles make (off-chain) data available in lending protocols
- What is the cost of borrowing?
- Mostly variable based on market's utilization
- Utilization =
$\frac{\text{"total debt"}}{\text{"total supplied"}}$ - State-of-the-art: fully autonomous with Curve Controller
- Liquid "HODLing"
- Leverage
- Carry-trade
- Shorting
- "Looping"
- Financing of arbitrage and MEV strategies
- etc.
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Bank | DeFi | DeFi Flash Loan | |
---|---|---|---|
Counterparty | Bank | Smart Contract | Smart Contract |
Collateral | <100% | >100% | No |
KYC | Yes | No | No |
Interest | Fix/variable | Fix/variable | Fix fee |
Maturity | Fixed | Open | 1 Block |
Liquidation | Through courts | On-chain | No need |
Access | Local (Jurisd.) | Global | Global |
Service hrs | Business hrs/days | 24/7/365 | 24/7/365 |
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