Cryptocurrency Loan Platforms - Collateral and Risks!

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While the advantages of cryptocurrency features, is that unlike traditional finance you can easily get loans as collateral for your virtual assets.

In the traditional financial loans to such assets as collateral, the loan is called a mortgage. Loans in this traditional financial barriers to entry are high. This approach may be easier for a small number of top customers of the giant financial institutions and private banks, but high barriers to lending for the public.

Lending platform / service of cryptocurrencies is much more easily accessible. Virtual assets for long-term holders, owned and presented a plan to get liquidity without the sale of assets.

Crypto Loan (virtual asset loans)
Virtual property loans, and provides ways traders can obtain liquidity without their assets for sale. Lenders provide their virtual assets as collateral and receive cash or a loan.

Virtual currency long-term private investors, is the reason for avoiding the tax due for evaluating want to receive your liquidity without the sale of owned assets, increase the future value of assets reasons usually cuts or short-term capital gains.

Classification of virtual property loans

Centralized finance (CeFi)
CeFi is a centralized service that protects (Custodial). Certain groups will manage the collateral. If traders can not access your collateral. The Lender will manage the assets of the private key.

CeFi can easily see that this is much more accessible than the traditional financing methods and traders are increasing, but also access to your assets, still they rely on centralized Lender. Still virtual assets, loans of about 80% belong to CeFi but these ratios are changing at a rapid pace.

DeFi
DeFi does not protect from certain institutions. Instead do not rely on a centralized authority, this role is performed instead of the smart container track tree. If a trader executes a loan through DeFi, it will direct the private key is kept with access to your collateral. DeFi can not pay the loan as legal tender.
Instead, it is a loan to a coin Stables, by lenders require you to liquidate them.

Need for a virtual asset loans
Virtual property loans, are not matters very little or necessary for the traditional financial lending against. Credit check is not required, the loan limit is proportional to the value of the virtual currency that I have provided as collateral.

LTV (Loan-to-value) ratio refers to the ratio of the value of loans to the value of the assets purchased. LTV ratio on the volatility of the price of virtual currency is very high, it is generally quite low catch.

Risk of virtual assets loans
Virtual property does not yet guarantee a stable legal guarantees. There is no way that you can force the stability of my assets when the exchange has been bankrupt or dead now.

Technical risks
Lending platform is a case where the inoperative by technical problems and hacking. This risk is DeFi is the highest. DeFi is because the way that works under the governance of the algorithm is sensitive solely to the technical risks.

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Traders risk
In the traditional banking usually it requires the government to ensure a certain level of liquidity in the financial institutions. But virtual property lending platform is free from these restrictions.
The virtual market plunge, many customers did not expect to fall in insolvent on your loan, the platform malfunctions, or you could lose all the money inside.

Margin calls and forced liquidation risk
When the decline of the market lending platform is requesting a margin call in order to prevent a liquidity disabled, or to enforce a rigid liquidation. The value of virtual assets fall, when the average LTV rose sharply, the platform will raise margin call to the borrower, or you can enhance standard of liquidation. If lending support platform is a request for additional margin call to meet, it will be liquidated by the mortgage to reduce the LTV based on the entire platform within acceptable limits.

Posted Using LeoFinance Beta



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Lot of good knowledge here, I need to spend like an hour to study your post. I'm gonna park it for now and wait for Raag to go to bed.

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Welcome back, I hope you are enjoying the wedding session,lol. Did you put on some weight, eating food in wedding??
!PIZZA

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Ok you will be jealous but I am very lucky here, I don't tend to put on weight no matter how much I eat 😁

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You are a lucky lady for sure 😊.

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Lot of good knowledge here, I need to spend like an hour to study your post. I'm gonna park it for now and wait for Raag to go to bed.

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