3 Matching Annotations
  1. Aug 2022
  2. Jun 2022
    1. Loans in the crypto world tend to be overcollateralized, requiring users to put up more value in crypto than what they receive in a loan. Although this works reasonably well for users who have already accumulated capital and want to use that capital in a different format (i.e. borrowing fiat currency against their crypto holdings), it doesn’t work well for the more standard reason people take out loans: because they don’t already have the money they need. Needless to say in an ecosystem whose advocates like to promise will “bank the unbanked” and help the marginalized, this is a bit of a setback. The need for these overcollateralized loans again stems from a lack of indicators to a person’s trustworthiness like those that are used in traditional finance, such as credit scores or banking records. Overcollateralized crypto loans are also made even more necessary on some anonymity-preserving loan platforms that choose not to require know-your-customer (KYC), who otherwise would see an influx of anonymous users borrowing money and making off with it.

      A consequence of not being able to narrow down who is behind an address is that the risk of loaning that address money goes up. This is expressed in highly collaterized loans.

      The permissionless network lowers the barrier for entry for people around the world to get access to finance, but the lack of a barrier increases the risk for the one granting a loan.

  3. Jun 2016
    1. Does this mean the entire blockchain does NOT need to be maintained by every node in a permissionless network? Or does this apply only to smart contracts? I ask that because the next paragraph refers to a contract specific question making me question if this whole section is pertinent only to smart contract issues.