I loved reading this - but question - what markets will this work for? TG in west has access to low interest rates via banking systems and a decently formalised lending ecosystem - so why would someone borrow at rates high enough to guarantee an investment level return on jr/sr cashpool
Thanks Ravish, yours is a very relevant question. We argue a lot about lending to the 'real world' through DeFi, and the issue of adverse selection is at the centre of our concerns. You can read more in the post about Crypto-Alt-Lending. Simply put, I believe that adverse selection in DeFi is REAL, because bankable businesses can have access to so many different sources of capital these days. Maker makes the project interesting because, in theory, they could mint DAI at quasi-zero cost of capital and provide senior financing to junior backers at rates that are way more attractive than those offered by family offices, credit funds, or VCs - which are basically enjoying the arb. But P2P lending like the one proposed at Goldfinch currently have a real adverse selection issue. Again, I will be happy to be proven wrong on this one also.
I loved reading this - but question - what markets will this work for? TG in west has access to low interest rates via banking systems and a decently formalised lending ecosystem - so why would someone borrow at rates high enough to guarantee an investment level return on jr/sr cashpool
Thanks Ravish, yours is a very relevant question. We argue a lot about lending to the 'real world' through DeFi, and the issue of adverse selection is at the centre of our concerns. You can read more in the post about Crypto-Alt-Lending. Simply put, I believe that adverse selection in DeFi is REAL, because bankable businesses can have access to so many different sources of capital these days. Maker makes the project interesting because, in theory, they could mint DAI at quasi-zero cost of capital and provide senior financing to junior backers at rates that are way more attractive than those offered by family offices, credit funds, or VCs - which are basically enjoying the arb. But P2P lending like the one proposed at Goldfinch currently have a real adverse selection issue. Again, I will be happy to be proven wrong on this one also.