Defi loan question

What is the main purpose of taking loans in the defi world? in the current system people take loans because they do not have the capital but in the defi system you need to show that you have capital to get capital and you need to lock your original capital, l i did not understand the purpose of that.

Thank you.

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People use DeFi loans to access new capital without selling the crypto assets they want to hold as investments. They may also want to borrow at a certain interest rate and use the borrowed capital to earn a higher rate of return.


thank you for the answer i understand now :smiley:

Hi all,
Just wondering about the security of my eth when using DEFI
If the eth is locked to secure liquidity for a loan.
What kind of event might cause the loss of my eth?
Is this an insurable event?
Thkx in advance for the help!

For the last week I have been slowly and very cautiously trying to use Compound. I supplied a small amount of Dai but I by mistake, I bought some USDC on Coinbase, thinking I could later swap it for Dai but the gas fees are so high that it is not profitable in the end. I know there has been talks about this already but I can’t help feeling a bit cheated. The APY, a few months ago was like 8% but now with much less APY and the fees of $18 dollars of gas per swap or to even move some Dai or Eth as supply into Compund or Aave, just seem ridiculous. What is the point?..I am left thinking.

@Ahmed_Amin I hear ya. I have always thought that but seen that the interest rates were so high in the DeFi space, a few months ago, it feels like I have missed the boat as far as investing goes. The gas fees are ridiculously high. There almost is no point in moving your money around paying all of these fees. What ever APY gains you make, are reduced with so many fees. I am feeling not so good about DeFi right now. I do like technology but the gas fees are just way to high for it to be worth investing.

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Hey there, I know this is a bit late, but I came across your question and wanted to chime in. So, the main purpose of taking loans in the defi world is to gain access to capital without going through traditional financial institutions.