Web3 lending - Money From Thin Air
May 14th, 2024 at 02:45
Imagine being able to get a loan without going to a bank, gathering a pile of documents, or explaining what you need the money for. Sounds fantastic? This is exactly how loans work in Web3!
🔎 Web3 is not just a buzzword. It's the next stage in the internet's evolution, where users become full owners of their data and assets. There is no place for intermediaries like banks, and all transactions are transparent and protected by cryptography.
It is in this decentralized environment that Web3 loans arise. They operate on the principle of smart contracts – a kind of digital agreement that is automatically executed once predetermined conditions are met.
⚙️ Imagine a vending machine: you put in money, choose a product, and the machine dispenses it. No salespeople, cashiers, or document checks. Smart contracts work the same way: you provide collateral (like a coin in a vending machine), receive a loan in return, and after repaying the debt, your collateral is returned to you.
So why are people taking loans in Web3? There are many reasons.
1️⃣ First, it's a great way to obtain liquidity (that is, access to funds) without selling your crypto assets. Imagine you have a collection of rare stamps. You don't want to sell them, but you urgently need money. In Web3, you can use stamps as collateral and get a loan.
2️⃣ Second, loans in Web3 allow you to profit from the difference in cryptocurrency exchange rates. Suppose you are confident that the price of Bitcoin will rise soon. You can take a loan in Ethereum, buy Bitcoin with it, and when the price rises, sell the Bitcoin, repay the debt, and remain in profit.
Third, Web3 loans are also a tool for creating new financial products. For example, you can launch a platform that issues loans secured by non-fungible tokens (NFTs).
Examples of using loans in Web3:
- Aave: a popular platform where you can borrow and lend in various cryptocurrencies.
- Compound: a platform that allows you to earn interest on your crypto assets by lending them to other users.
- MakerDAO: a platform that issues the stablecoin DAI, backed by collateral in Ethereum cryptocurrency.
Web3 erases boundaries and opens up new possibilities. Loans are just the tip of the iceberg. This technology is changing our understanding of finance, making it more accessible, transparent, and efficient.
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