I don't know anything about Defi but recently i have resumed being active on platforms like Blurt and started seeing Defi, everywhere. At least, i know that Defi signifies Decentralized Financing but what is Decentralized Financing?
I have started my research slowly and i have started to read of how people get loans with lower collateral than their loan. If that is that possible because of Defi that is interesting but how is that possible? I would understand that people can now get loans in an automated manner without the interference of banks and without the usual credit score criteria and all that but how can a person get a loan through Defi, without the person having at least equal collateral as the loaned amount. What if the borrower doesn't pay back, who bears the loss?
I am still doing my research. I have come across some applications that offer such loans. They have something called a loan calculator and i don't know if these are Defi websites. One that i have come across recently is https://celsius.network.
It is a very simple application that you can download on phone, so i downloaded it and even without signing up, i noticed the loan calculator. I am not yet sure what some of the terminologies mean but the interesting part so far is the ability to take a loan for a long tenure even up to 36 months. I also notice that you can adjust some of the terms to get favourable rates. One of the main terminologies is LTV which signifies Loan To Value and it is measured in percentage. The higher the percentage of LTV means that you are paying a smaller collateral.
Another thing that interest me about the celsius application is that you can deposit your cryptocurrency and gain interest on it without doing much. This means that you can earn from your cryptocurrency even when the markets go up or down without actually trading. This is a nice feature for someone like me who doesn't know how to trade and it is an interesting feature but i still wonder how celsuis app makes money from my cryptocurrency sitting idle. Do they offer it in loans and get interest then reward me with part of the interest? Do they use the cryptocurrency to trade and make gains then share their revenue with me but what if they lose?
I don't know if these applications are safe to deposit cryptocurrency on but the celsius app looks well established and fanciful. They have a their own currency which you can find on https://coinmarketcap.com/currencies/celsius/ and it has a lot of volume and interest. Their application also shows that they have more than 100,000 depositors.
I now find apps like Celsius showing in my email in the form of an ad or popping up on my brave browser and i now click and visit them. Lately, i have started to see Defi everywhere.
I still have a long way to go in understanding Defi but my start so far is interesting. If you talk of loans, it is hard to get loans the normal way going through banks. In my location, you would need to be a worker and to be at your job for a minimum of two years to get just a small credit line and for sure you need some good standing. I don't know how it will work for big loans but it will surely involve a lot of paper work, huge fees and for sure you will need a collateral that is bigger than your loan amount.
The positive thing with the loans in Defi is, you can get your loans instantly and as it appears, you can even choose terms that favors you and if you are not a good trader, you can deposit your cryptocurrency on an app like Celsius and get returns frequently without spending or losing your cryptocurrency.
I know that i still have a lot to learn about Defi and many applications to try to get a better understanding of Defi and i am willing to learn because it is becoming interesting. I have not bought any Defi cryptocurrency yet but i am really interested in trying. The Celsius cryptocurrency seems to have some value. On the application, you can apply for a loan and pay your collateral using the Celsius cryptocurrency and you have a better discount. You also get some returns when you have Celsius cryptocurrency. The Celsius application shares 80 percent of their revenue among owners of the Celsius cryptocurrency.