2022 has been without a doubt one of the most difficult years I remember in the history of cryptocurrencies. Too many black swans with a tragic end. The heavy money printing between 2020 and 2021, ended up generating widespread inflation, if we add bad practices and management of large projects like (TERRA), (FTX) or treasury management protocols like (OHM), the trigger is undoubtedly the punishment we are seeing in the entire sector, although I really thought we were going to be much worse than we are now. I don’t want to forget about the war we are living over Ethereum’s move to PoS, nor the L2 war or names such as, Daniele Sesta, Sifu and Solid with Andre Cronje, to understand the narrative change we have had since January 1st.
Decentralized finance taught us the basics, and without knowing how to use it well, we have taken too many steps forward at great speed, logic indicates that the fall and reflection seem imminent. We want to apply derivatives, perpetual futures, buy or sell options, provide liquidity in pools under a range management or use NFT’s to generate a passive return through lending, without understanding how settlements work, without appreciating the great advantage of being able to use your assets as collateral or simply learn to save a dollar through a monthly income stream.
Today there are platforms to begin to manage deposits and loans to make debt profitable and productive, yes you heard it right, the debt will help you achieve your goals, as long as it is managed correctly, and for this we must simply understand 3 basic rules and find the tool that automates this activity, for example one of those tools is DeFi Saver.
It is not so important the platform itself, but the ability and the need you have to use it, commonly what worries everyone who acquires debt in DeFI is to control it, so that it does not become harmful and penalize you. You can borrow for many reasons, whatever it is, the important thing is that you can access direct credit without intermediaries and without questions, depositing collateral, which at least covers 150% of the debt you acquire.
Therefore, if you want to buy a bike for $ 2,000, you must provide a higher value collateral to dispose of the $ 2,000 and buy the bike. While it may seem basic to you, this particular feature of being able to use your tokens as collateral because of their intrinsic value, without having to sell them to access liquidity, broke the deck for good on the use of code and blockchain. Imagine in 2019, when ETH was worth $200, having to sell them on an exchange to get that $2,000, years later, when it touched and surpassed $4,000 each ETH, you would have realized the error and inefficiency of the system.
Therefore, leaving your ETH as collateral and borrowing does not put you at a disadvantage, it is just the opposite, it helps you to be efficient and optimize the use of the assets you have in your portfolio, until you decide to sell them well above the purchase price. The point is to be clear that if the value of the asset used as collateral decreases, you can be liquidated, and this is not a situation you want to reach, since losing the ETH that you have accumulated with so much effort is painful, but it happens very often, since here nobody is going to call you at night, or on a Thursday afternoon to adjust the health of your loan, things happen (or rather) are self-executed because they are signed in the #SC.
A good way to control the debt and avoid losing all your collateral, is to monitor the loan, having the option to liquidate it when you want or to be able to pay parts of the debt, since you are not yet interested in repaying it (imagine that you do it once you have enjoyed your bike and after a year you sell it). Another point is from that position too, to be able to use more assets and leverage or make partial withdrawals from them, and even transfer funds between different debt positions.
The automation of these very basic actions (loan and deposit), but vital for every human being and every society since the beginning of days, gives us a great competitive advantage with respect to the traditional system. Its slow processes due to the high bureaucracy that they have, they kill the opportunity and kill the immediacy of satisfying a need in real time. Being able to correctly manage our debt, being able to protect ourselves from liquidation and being able to collateralize our digital assets will soon be a right for everyone with a wallet and some assets, and not a privilege of a few.
If the question arises as to why use a DEX instead of a CEX, which is certainly cheaper and easier to use to open long, short or lend your assets, just remember “Not your keys, not your money” or remember names like #MT. Gox, #FTX or #Celsius.
DeFi has given us again the option of control of our money, don’t waste it. So, I hope I have made it clearer to you that debt thanks to volatility, thanks to automation and thanks to the multi-collateralization that blockchain technology brings us, becomes profitable.