Skip to main
How does #defi work? Today, lending and borrowing money all revolves around the individuals involved. Banks need to know whether you're likely to repay a loan before lending. Decentralized lending works without either party having to identify themselves. Instead the borrower must put up collateral that the lender will automatically receive if their loan is not repaid. Some lenders even accept NFTs as collateral. Borrowing Borrowing money from decentralized providers comes in two main varieties. Peer-to-peer A borrower will borrow directly from a specific lender. *ex. Exodus supports Peer-to-peer (p2p) trading Pool-base where lenders provide funds (liquidity) to a pool that borrowers can borrow from. *ex. Aave, Compound Access to global funds When you use a decentralized lender you have access to funds deposited from all over the globe, not just the funds in the custody of your chosen bank or institution. This make loans more accessible and improves the interest rates. Tax-efficiencies Borrowing can give you access to the funds you need without needing to sell your ETH (a taxable event). Instead you can use ETH as collateral for a stablecoin loan. This gives you the cash-flow you need and lets you keep your ETH. Stablecoins are tokens that are much better for when you need cash as they don't fluctuate in value like ETH. Flash loans Flash loans are a more experimental form of decentralized lending that let you borrow without collateral or providing any personal information. They're not widely accessible to non-technical folks right now but they hint at what might be possible to everyone in the future. It works on the basis that the loan is taken out and paid back within the same transaction. If it can't be paid back, the transaction reverts as if nothing ever happened. The funds that are often used are held in liquidity pools (big pools of funds used for borrowing). If they are not being used at a given moment, this creates an opportunity for someone to borrow these funds, conduct business with them, and repay them in-full quite literally at the same time they're borrowed. This means a lot of logic must be included in a very bespoke transaction. A simple example might be someone using a flash loan to borrow as much of an asset at one price so they can sell it on a different exchange where the price is higher. So in a single transaction the following happens: You borrow X amount of $asset at $1.00 from exchange A You sell X $asset on exchange B for $1.10 You pay back loan to exchange A You keep the profit minus the transaction fee If exchange B's supply dropped suddenly and the user wasn't able to buy enough to cover the original loan, the transaction would simply fail. To be able to do the above example in the traditional finance world, you'd need an enormous amount of money. These money-making strategies are only accessible to those with existing wealth. Flash loans are an example of a future where having money is not necessarily a prerequisite for making money. Lending You can earn interest on your crypto by lending it and see your funds grow in real time. Right now interest rates are much higher than what you're likely to get at your local bank. *ex. You lend your 100 Dai, a stablecoin, to a product like Aave. You receive 100 Aave Dai (aDai) which is a token that represents your loaned Dai. Your aDai will increase based on the interest rates and you can see your balance growing in your wallet. Dependant on the APR, your wallet balance will read something like 100.1234 after a few days or even hours! You can withdraw an amount of regular Dai that's equal to your aDai balance at any time. Sources - Not financial advice. DYOR. DCA. BTD. HODL. #crypto #cryptocurrency #cryptocurrencies #cryptoaddict #cryptoalert #cryptobeliever #bitcoin #ethereum #cardano #public #publiccommunity #dyor #longterm #growth #learningtoinvest #feedyourbrain #learningaboutcrypto #possibilities #newinvestor #tech #technology . . .
Own your future.
Build your portfolio.

Own your future.
Build your portfolio.

Invest in stocks, ETFs and crypto. Sign up now to claim free stock on us. Start investing today.
Sign up
Contact Us
Check the background of this firm on FINRA’s BrokerCheck.

© Copyright 2022 Public Holdings, Inc. All Rights Reserved.

Market data powered by Xignite.

Brokerage services for US-listed, registered securities are offered to self-directed customers by Open to the Public Investing, Inc. (“Open to the Public Investing”), a registered broker-dealer and member of FINRA & SIPC. Additional information about your broker can be found by clicking here. Open to Public Investing is a wholly-owned subsidiary of Public Holdings, Inc. (“Public Holdings”). This is not an offer, solicitation of an offer, or advice to buy or sell securities or open a brokerage account in any jurisdiction where Open to the Public Investing is not registered. Securities products offered by Open to the Public Investing are not FDIC insured. Apex Clearing Corporation, our clearing firm, has additional insurance coverage in excess of the regular SIPC limits. Additional information can be found here

Brokerage services for alternative assets available on Public are offered by Dalmore Group, LLC (“Dalmore”), member of FINRA & SIPC. “Alternative assets,” as the term is used at Public, are equity securities that have been issued pursuant to Regulation A of the Securities Act of 1933 (as amended) (“Regulation A”). This content is not investment advice. These investments are speculative, involve substantial risks (including illiquidity and loss of principal), and are not FDIC or SIPC insured. Alternative Assets purchased on the Public platform are not held in an Open to the Public Investing brokerage account and are self-custodied by the purchaser. The issuers of these securities may be an affiliate of Public, and Public (or an affiliate) may earn fees when you purchase or sell Alternative Assets. For more information on risks and conflicts of interest, see these disclosures. An affiliate of Public may be “testing the waters” and considering making an offering of securities under Tier 2 of Regulation A. No money or other consideration is being solicited and, if sent in response, will not be accepted. No offer to buy securities can be accepted, and no part of the purchase price can be received, until an offering statement filed with the SEC has been qualified by the SEC. Any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of acceptance given after the date of qualification by the SEC or as stated in the offering materials relating to an investment opportunity, as applicable. An indication of interest to purchase securities involves no obligation or commitment of any kind.

Cryptocurrency execution and custody services are provided by Apex Crypto LLC (NMLS ID 1828849) through a software licensing agreement between Apex Crypto LLC and Public Crypto LLC. Apex Crypto is not a registered broker-dealer or a member of SIPC or FINRA. Cryptocurrencies are not securities and are not FDIC or SIPC insured. Apex Crypto is licensed to engage in virtual currency business activity by the New York State Department of Financial Services. Please ensure that you fully understand the risks involved before trading: Legal Disclosures, Apex Crypto.

Dalmore and Apex Crypto, LLC are not affiliated with any of the Public Holdings subsidiaries. Commission-free trading of stocks and ETFs refers to $0 commissions for Open to the Public Investing self-directed individual cash brokerage accounts that trade the U.S.-listed, registered securities electronically during the Regular Trading Hours. Keep in mind that other fees such as regulatory fees, Premium subscription fees, commissions on trades during extended trading hours, wire transfer fees, and paper statement fees may apply to your brokerage account. Please see Open to the Public Investing’s Fee Schedule to learn more.

Fractional shares are illiquid outside of Public and not transferable. For a complete explanation of conditions, restrictions and limitations associated with fractional shares, see our Fractional Share Disclosure to learn more.

All investments involve the risk of loss and the past performance of a security or a financial product does not guarantee future results or returns.