零点课堂 | What Are Flash Loans in DeFi? (2)

Typically, unsecured loans from institutions require some kind of credit check. They'll look at your track record (the credit score) to measure your ability to repay. If they see that you've taken out several loans and paid them back on time, they might think huh, they're pretty reliable. Let's lend them some money.
At that point, the institution gives you the money, but it comes with strings attached. Those strings are interest rates. To get the money now, you need to accept that you'll be paying back a higher amount later.

You might be familiar with this model if you use a credit card. If you don't pay your bill for a given period, you get charged interest until you repay the full balance (and additional fees).

Secured loans

Sometimes a good credit score isn't enough. Even if you've repaid all of your loans on time for decades, you'll have a tough time borrowing large sums of money based solely on your creditworthiness. In these cases, you need to put up collateral.

If you ask someone for a big loan, it's risky for them to accept it. To lower their risk a bit, they'll demand that you put some skin in the game. An asset of yours – it could be anything from jewelry to property – will become the lender's if you fail to pay them back in time. The idea here is that the lender can then recover some of the value that they've lost. In a nutshell, that's collateral.

Suppose that you now want a $50,000 car. Bob trusts you, but he doesn't want to give you the money in the form of an unsecured loan. Instead, he asks that you put up some collateral – your collection of jewelry. Now, if you fail to repay the loan, Bob can seize your collection and sell it.

How does a flash loan work?

Let's call a flash loan an unsecured loan, purely because you don't provide any collateral. But you also don't need to pass a credit check or anything like that. You simply ask the lender if you can borrow $50,000 in ETH, they say yep! Here you go! and you're off.

声明:本文由 Binance撰写,零点财经收录,观点仅代表作者本人,绝不代表零点财经赞同其观点或证实其描述。

本文由 零点财经 作者:tao 发表,其版权均为 零点财经 所有,文章内容系作者个人观点,不代表 零点财经 对观点赞同或支持。如需转载,请注明文章来源。
分享生成图片
49

发表回复

零点课堂 | What Are Flash Loans in DeFi? (2)

2021-04-15 15:00:21

Typically, unsecured loans from institutions require some kind of credit check. They'll look at your track record (the credit score) to measure your ability to repay. If they see that you've taken out several loans and paid them back on time, they might think huh, they're pretty reliable. Let's lend them some money.
At that point, the institution gives you the money, but it comes with strings attached. Those strings are interest rates. To get the money now, you need to accept that you'll be paying back a higher amount later.

You might be familiar with this model if you use a credit card. If you don't pay your bill for a given period, you get charged interest until you repay the full balance (and additional fees).

Secured loans

Sometimes a good credit score isn't enough. Even if you've repaid all of your loans on time for decades, you'll have a tough time borrowing large sums of money based solely on your creditworthiness. In these cases, you need to put up collateral.

If you ask someone for a big loan, it's risky for them to accept it. To lower their risk a bit, they'll demand that you put some skin in the game. An asset of yours – it could be anything from jewelry to property – will become the lender's if you fail to pay them back in time. The idea here is that the lender can then recover some of the value that they've lost. In a nutshell, that's collateral.

Suppose that you now want a $50,000 car. Bob trusts you, but he doesn't want to give you the money in the form of an unsecured loan. Instead, he asks that you put up some collateral – your collection of jewelry. Now, if you fail to repay the loan, Bob can seize your collection and sell it.

How does a flash loan work?

Let's call a flash loan an unsecured loan, purely because you don't provide any collateral. But you also don't need to pass a credit check or anything like that. You simply ask the lender if you can borrow $50,000 in ETH, they say yep! Here you go! and you're off.

声明:本文由 Binance撰写,零点财经收录,观点仅代表作者本人,绝不代表零点财经赞同其观点或证实其描述。