RE: Will the wait for Zero Coupon Bonds in DeFi be over now?

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Dear @paragism,

Quite interesting topic that I did not research enough yet. How do DeFis make sure that the borrower will pay back the money?

For example a bank makes sure you will pay back as it can take your property, use state power to force you to pay back, etc...

Sincerely,

@vlemon



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(Edited)

Borrowing is collateral based. Collateral is crypto here and it is locked in smart contract. So, the loan is secured. Ex- you can get 75% loan term value by submitting 1 ETH in Aave. Collateral gets liquidated when ETH price falls below liquidation threshhold( for Aave it is 80%). When liquidation happens, liquidators impose liquidation penalty of 5% in Aave. You can check Aave dapp through metamask or Trustwallet. It is very user friendly and easy to understand.

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Thank you for this comment @paragism,

I was also wondering, what is the difference then to a leverage trade where you have USD or ETH in collateral to use more ETH?

It is for a longer period of time? I'll check it out, thank you :)

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Only risk is liquidation risk. No cryptocurrency is stable. So if ETH price falls heavily, the collateral gets liquidated and incurs some loss (not total loss).

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