What is wrong about the centralized crypto ceremony?
What is wrong about the centralized crypto ceremony?
- crypto loan must be aware of how customer funds are treated in the event of bankruptcy before they submit an application
- The current market upset has uncovered holes in some projects, but it is also a time to build on existing models and improve them
On the one hand, the bankruptcy of Voyager has considerable consequences for its customers - if you consider that the usage agreement did not really guarantee the protection of their funds. But that does not apply to every crypto lender; Everyone probably has different usage agreements and works in a unique way with regard to the treatment of account holders.
Customers who run the risk of becoming creditor with unsecured claims
Daniel Besikof, partner of the Loeb & Loeb law firm in New York, said that Voyager treats its account holders in this way Unsured believer .
"The way the [user] The agreement provides for how the assets are held, and how the company actually holds or uses these assets are the most important data points to determine how these assets are likely to be treated in the event of insolvency," he said in an interview.
In retrospect, he said that Voyager's business model was difficult for him to justify him. "You have essentially only awarded the insoles of the customers to a small handful of borrowers, of which the largest [Three Arrows Capital] is obviously with little security."
BESIKOF added that most customers might not have understood that they had registered for a higher risk than simply investing in cryptocurrency plants.
"I do not believe that many of these customers have recognized that Voyager may be an even greater investment risk, since the assets of customers were awarded to people for whom customers had probably not taken out insurance," he said.
It may also have been the case that the lender did not explicitly state the exact risks and it was not clear that crypto funds would be considered the ownership of the bankruptcy mass if they had to go through insolvency proceedings.
Celsius customers are probably faced with the same problem. The companies use conditions stipulate that the high-interest "EARN" accounts of the inserts contain a transfer of ownership of their funds to Celsius. The company not only manages customer funds on behalf of the insert.
In the future, investors expect alternative depot methods such as hardware wallets and off-chain storage solutions.
"Off-chain storage solutions could become more popular and should probably become more popular because customers can at least minimize the risk of stock exchange insolvency in this way," he said, adding that it could be difficult for some less secure stock exchanges to find them.
Checking the percentages of the awarded and borrowed funds
Daniel Tal, a head of the decentralized financial project Ichi, told Blockworks that the current market depression has uncovered gaps in some projects, but it was also a time for users and developers to create new protocols that improve existing models.
"This area is still a bit experimental, and we learn continuously where we can invest how to invest in a safe way," said Tal.
Due to the development of the industry, the regulatory authorities still did not have the time to recognize problems in the system. This is probably because an intelligent regulation of people who understand the space and how it works.
The crypto loan allocation is similar to traditional lending, but includes digital assets. However, some commentators say that the high returns promised by platforms such as Celsius are not sustainable. They may also be a wrong name - because excessively high returns are more of a bet than a real return - unless the lenders make it transparent how they can handle it.
rental and rental platforms only offer minimal information about where the funds you have borrowed flow.
There should be certain risk parameters for large companies that deposit funds from a centralized web2 area into decentralized financial protocols (Defi), such as: B. Exams of the percentage of the awarded or borrowed funds suggested valley.
"We saw these events of debt, in which people ... have taken over more than they can master," said Tal. "Models must be sustainable, in the sense that they move away from a derivative perspective to eliminate the risk of volatility. I think this is one of the greatest risks when swapping and securing these funds."
The blockchain developer pointed out the functional of traditional loans: If you want to secure a bank loan for buying a Toyota Camry, you would not only have to offer an asset as a security in the event of a default failure, but also provide an explanation for why you need this money. The crypto loan dream could be based on this example, where secure liquidity strategies enable customers to know where their funds will end up.
For him there are currently no best practice models in the credit area. "I do not think that someone is doing it in a safe way. What is possible is able to steer people's loans in an intelligent way - and that has to be built up."
bring the best crypto and findings of the day into your inbox every evening. .
The post What is wrong with the centralized crypto lending? is not a financial advice.