Aren’t some crypto entities basically practicing fractional reserve banking?
i.e. exchanges offering leverage trading, some stable coins, staking/lending sites, etc.
Are they more like bookies that offer points, making up loses over the long run?
To some degree sure.
Firstly, centralised entities will do what they do and I don’t think they enter the chat if you idealise removing middle-men from the space where possible.
In terms of DeFi, lending platforms are based on algorithms which maintain equitable value through over-collateralisation and liquidations.
It’s the onus of the borrower to maintain a certain collateralisation ratio to prevent themselves from being liquidated. Should the liquidation level be hit, they’re left with only the value of the loan and the collateral is absorbed by the protocol.
These attributes, combined with floating lending and borrowing rates means that these lending protocols should have longevity should you trust the math behind protocols like Maker DAO.
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Thanks for your reply and insight!
I think it’s been a well-known thing that exchanges don’t always have the crypto that you buy. That’s why not your keys, not your crypto. It’s also why you might have a wait time in moving them from certain exchanges, as well.
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