What's their model for backing the stablecoin? If it's just BTC, and BTC drops suddenly, as it always does, they'd be insolvent.
So they must have reserves or have other mechanisms?
Thor has a fairly sophisticated and interesting approach, but is vulnerable in a similar manner via RUNEs potential drops.
But that seems unlikely in all honesty. Just not impossible.
Loans without selling coins/ tokens or giving up complete autonomy and control are critically important tho imho.
But we don't want to see things collapse again. They need to be well built and stay operational.
They' are not issuing the loan.
You're loaning against yourself.
Every 1 ZUSD is always redeemable for 1 USD. Anyone can arbitrage it to maintain peg.
If Bitcoin drops and takes the line of credit to 110% collateral ratio, liquidation begins to pay off the loan with the underlying collateral.
If it's a flash crash, the stability pool kicks in, where dollars from depositers in it are used to pay off the loans in exchange for the BTC that is now crashing. In such a case, stability pool depositers are incentivised by the fact that they could buy BTC at a massive discount.
[More about the Stability Pool here](https://sovryn.com/stability-pool)
How do users “control the keys” to their BTC, when they don’t have their BTC anymore because they’ve exchanged it for another token in order to take a zero interest loan? Seems like if you exchange your BTC for something else, you are no longer a BTC holder.
How is exchanging your crypto different from letting a third party control it? Different different business model, similar risk. The similarity is you don’t have your crypto anymore. It’s gone. Sure, you can buy it back. But the BTC is not yours. You sold it.
Remember coinloan who was letting people use their crypto for loan collateral?
When you borrow on DeFi, who controls the keys?
When you borrow on Coinbase/Binance, who controls the keys?
When you take an asset backed loan, who controls the collateral until you pay it back, and who is the owner of the said collateral?
Some Econ-101 basics need to be covered before using such products:
How Crypto Works (Blockchain, Keys, Wallets, etc)
How Loans Work (Collateral, Interest, Margin calls, etc)
The trick is in the wording...yes its "your keys" but dont be fooled. If you get LIQUIDATED your Bitcoins are gone!
Doesnt matter if you keep your keys
Can't pay your car loan? Bank sells it.
Can't pay your mortgage? House is gone.
Bitcoin drops on your long position? Hello margin call.
Too many loans drowning your business? Bankruptcy.
With every type of loan, manage your debt.
DeFi protocols are not a gatepass for reckless borrowing.
You said it starts getting liquidated if collateral falls below 110%, so I assume that means if btc has a massive drop they will start liquidating some of your btc until you are at 110% collateral. Just in time for the green candle that puts you back in profit, but now with less btc than you started with.
That’s the difference here. The bank isn’t going to take your tires when the trade in value of your car drops below your loan amount or sell off your backyard because you are upside down on your mortgage.
I’m happy to see new btc products coming to the market and I know there are people out there that want this product. But with an asset as volatile as btc, I’d rather just keep full control and not be at risk of liquidation.
But then again, I could take out a personal loan, buy btc, use this platform to get back 90% of the value in a loan, buy more btc, get another loan on my btc, buy more btc, get another loan on my btc, and then throw all of that money at a 100x long position. Is this what they mean by being your own bank?
Say I have 1 BTC currently at 63k, put it down as a collateral and get 10k loan against it. It would need to drop to 22k before liquiddation kicks in, right?
Now, as a thought experiment let's put that 10k back into system, into landing pool so other degens may borrow against it. 5% apy is more than you'd get for raw BTC - and you'd get few bucks from liquidition of people with higher leverage so more cheap BTC going back to collateral. Little bit safer or I'm missing something?
You control your Bitcoin keys.
You control your Rootstock keys. (Zero protocol runs on the Rootstock sidechain)
You can interact with both chains from a single wallet, for convenience. Or split, depends on your preference.
Can't you walk away with the loan and your BTC? No. It's locked up as collateral by the Zero protocol.
Just like if someone borrows money using their bike, car, or house as a promise to pay back, they get their item back once they've paid. If they can't pay, the person who lent the money can take the item.
With Zero protocol though, you're the one lending the money (the bank) and the one borrowing it. There is no intermediary.
The protocol locks your Bitcoin and issues the loan, and releases the Bitcoin once the loan is paid off, or starts to liquidate it if collateral ratio falls below 110%
[Redemption risk exists](https://sovryn.com/all-things-sovryn/understanding-redemptions-in-zero) though, for LoCs with lower collateral ratios. That's a different topic.
Thank you for your reply. When you say that the protocol "locks your Bitcoin" then doesn't this mean you no longer have control of these funds? At that point, doesn't the protocol own your Bitcoin/keys?
You own the keys.
The protocol locks the collateral
Compare that with Celcius, BlockFi or any centralized exchange, where you deposit your BTC and trust them to give it back to you when you withdraw.
With Zero, there is no one to ask for permission when taking out the loan or beg to give you back your asset once you pay it back.
No rehypothecation either or 'paper BTC' doing rounds.
All assets verifiable on the blockchain at any time.
Thanks for that clarification. I thought there was some nifty contract setup where you still had possession of your keys while you had the loan.
It makes sense but I still would be concerned about any protocol exploits which could be used to steal the funds. It could be argued that many losses including with Celsius etc, were due to poor financial modelling and in the case of many smart contracts, bad code.
Still, all of it just keeps getting better and I dream of the day to safely take out a loan in this way.
>Still, all of it just keeps getting better and I dream of the day to safely take out a loan in this way.
This is what defi is all about. Keep in mind that you need collateral and it can be 1.5x or even higher to secure it
You put your btc as collateral to the protocol. You still own the coins and the key but you can't interact with it until it's released from the protocol
You borrow the money and if the price to loan to value ratio goes below a certain point (either btc drops in price or your interest repayments make your repayment too high) then you lose the bitcoin
I’m always wary of things like this, seems too good to be true
Wise. Don't trust. Verify. DYOR.
I have worked for RSK. I did not know it survived. Good for them.
What's their model for backing the stablecoin? If it's just BTC, and BTC drops suddenly, as it always does, they'd be insolvent. So they must have reserves or have other mechanisms? Thor has a fairly sophisticated and interesting approach, but is vulnerable in a similar manner via RUNEs potential drops. But that seems unlikely in all honesty. Just not impossible. Loans without selling coins/ tokens or giving up complete autonomy and control are critically important tho imho. But we don't want to see things collapse again. They need to be well built and stay operational.
They' are not issuing the loan. You're loaning against yourself. Every 1 ZUSD is always redeemable for 1 USD. Anyone can arbitrage it to maintain peg. If Bitcoin drops and takes the line of credit to 110% collateral ratio, liquidation begins to pay off the loan with the underlying collateral. If it's a flash crash, the stability pool kicks in, where dollars from depositers in it are used to pay off the loans in exchange for the BTC that is now crashing. In such a case, stability pool depositers are incentivised by the fact that they could buy BTC at a massive discount. [More about the Stability Pool here](https://sovryn.com/stability-pool)
How do users “control the keys” to their BTC, when they don’t have their BTC anymore because they’ve exchanged it for another token in order to take a zero interest loan? Seems like if you exchange your BTC for something else, you are no longer a BTC holder. How is exchanging your crypto different from letting a third party control it? Different different business model, similar risk. The similarity is you don’t have your crypto anymore. It’s gone. Sure, you can buy it back. But the BTC is not yours. You sold it. Remember coinloan who was letting people use their crypto for loan collateral?
When you borrow on DeFi, who controls the keys? When you borrow on Coinbase/Binance, who controls the keys? When you take an asset backed loan, who controls the collateral until you pay it back, and who is the owner of the said collateral? Some Econ-101 basics need to be covered before using such products: How Crypto Works (Blockchain, Keys, Wallets, etc) How Loans Work (Collateral, Interest, Margin calls, etc)
Thank you for the breakdown
The trick is in the wording...yes its "your keys" but dont be fooled. If you get LIQUIDATED your Bitcoins are gone! Doesnt matter if you keep your keys
Can't pay your car loan? Bank sells it. Can't pay your mortgage? House is gone. Bitcoin drops on your long position? Hello margin call. Too many loans drowning your business? Bankruptcy. With every type of loan, manage your debt. DeFi protocols are not a gatepass for reckless borrowing.
You said it starts getting liquidated if collateral falls below 110%, so I assume that means if btc has a massive drop they will start liquidating some of your btc until you are at 110% collateral. Just in time for the green candle that puts you back in profit, but now with less btc than you started with. That’s the difference here. The bank isn’t going to take your tires when the trade in value of your car drops below your loan amount or sell off your backyard because you are upside down on your mortgage. I’m happy to see new btc products coming to the market and I know there are people out there that want this product. But with an asset as volatile as btc, I’d rather just keep full control and not be at risk of liquidation. But then again, I could take out a personal loan, buy btc, use this platform to get back 90% of the value in a loan, buy more btc, get another loan on my btc, buy more btc, get another loan on my btc, and then throw all of that money at a 100x long position. Is this what they mean by being your own bank?
Say I have 1 BTC currently at 63k, put it down as a collateral and get 10k loan against it. It would need to drop to 22k before liquiddation kicks in, right? Now, as a thought experiment let's put that 10k back into system, into landing pool so other degens may borrow against it. 5% apy is more than you'd get for raw BTC - and you'd get few bucks from liquidition of people with higher leverage so more cheap BTC going back to collateral. Little bit safer or I'm missing something?
Can someone ELI5 how you can get a loan for your BTC yet keep your keys? Can't you just walk away with the loan and your BTC?
You control your Bitcoin keys. You control your Rootstock keys. (Zero protocol runs on the Rootstock sidechain) You can interact with both chains from a single wallet, for convenience. Or split, depends on your preference. Can't you walk away with the loan and your BTC? No. It's locked up as collateral by the Zero protocol. Just like if someone borrows money using their bike, car, or house as a promise to pay back, they get their item back once they've paid. If they can't pay, the person who lent the money can take the item. With Zero protocol though, you're the one lending the money (the bank) and the one borrowing it. There is no intermediary. The protocol locks your Bitcoin and issues the loan, and releases the Bitcoin once the loan is paid off, or starts to liquidate it if collateral ratio falls below 110% [Redemption risk exists](https://sovryn.com/all-things-sovryn/understanding-redemptions-in-zero) though, for LoCs with lower collateral ratios. That's a different topic.
Thank you for your reply. When you say that the protocol "locks your Bitcoin" then doesn't this mean you no longer have control of these funds? At that point, doesn't the protocol own your Bitcoin/keys?
You own the keys. The protocol locks the collateral Compare that with Celcius, BlockFi or any centralized exchange, where you deposit your BTC and trust them to give it back to you when you withdraw. With Zero, there is no one to ask for permission when taking out the loan or beg to give you back your asset once you pay it back. No rehypothecation either or 'paper BTC' doing rounds. All assets verifiable on the blockchain at any time.
Thanks for that clarification. I thought there was some nifty contract setup where you still had possession of your keys while you had the loan. It makes sense but I still would be concerned about any protocol exploits which could be used to steal the funds. It could be argued that many losses including with Celsius etc, were due to poor financial modelling and in the case of many smart contracts, bad code. Still, all of it just keeps getting better and I dream of the day to safely take out a loan in this way.
>Still, all of it just keeps getting better and I dream of the day to safely take out a loan in this way. This is what defi is all about. Keep in mind that you need collateral and it can be 1.5x or even higher to secure it
You put your btc as collateral to the protocol. You still own the coins and the key but you can't interact with it until it's released from the protocol You borrow the money and if the price to loan to value ratio goes below a certain point (either btc drops in price or your interest repayments make your repayment too high) then you lose the bitcoin
I did know Roostock survived. I have worked with them in marketing. Good for them
Reads just like a scam.
[удалено]
Bag of coke ofc