What I dont understand is how they calculate rates for loans. I dont know much about DeFi and just consider it as scammy as NFTs, but for me a lending rate is always function of a default risk: too high, no loan, high, high rate, low, low rates.
I've worked in fintech and am in a bank now and we've always had our proprietary mapping table with field studies of default stats and long attribute lists (age, immigration status, salary, number of other loans, number of past default, other assets and so on), and the key was to either religiously stick to these or take strategic decisions to open the valves if needed (say to fit a quota, we let the younger people in for a while).
How is DeFi doing lending rates ?
Edit: got it, over collateralized with valuable collateral confiscated rather than promised so not fit for the same purposes as normal consumer loan. You wont pay your daughter's sweet 16 mega party in mexico or your son's wedding in Singapore or your first car in France with a DeFi loan :D So it's not exactly decentralized finance, it's more decentralized leverage, I guess. At least you cant default a DeFi loan, which sounds reassuring on paper.
I've worked in fintech and am in a bank now and we've always had our proprietary mapping table with field studies of default stats and long attribute lists (age, immigration status, salary, number of other loans, number of past default, other assets and so on), and the key was to either religiously stick to these or take strategic decisions to open the valves if needed (say to fit a quota, we let the younger people in for a while).
How is DeFi doing lending rates ?
Edit: got it, over collateralized with valuable collateral confiscated rather than promised so not fit for the same purposes as normal consumer loan. You wont pay your daughter's sweet 16 mega party in mexico or your son's wedding in Singapore or your first car in France with a DeFi loan :D So it's not exactly decentralized finance, it's more decentralized leverage, I guess. At least you cant default a DeFi loan, which sounds reassuring on paper.