I have no experience with crypto, but this I don't understand.
> DeFi is unlocking the value of an asset, making it liquid...
Like a mortgage or a bond issuance (bonds are secured against assets of the corporation)?
> Credit is loaning you money and providing an interest rate. Usually something insane like 15%.
Average rate for a 30-year fixed mortgage in the US is about 4%[1]. Average Aaa corporate bond yield is 3.43%[2]. I guess that you are talking about interest rate on credit cards? I think that credit card debt is pretty small compared to the size of the mortgage or bond markets.
> One example is on Kaurura...
I'm not sure I follow you here, but it sounds like you get a loan at 19% APR against some collateral. Then you use the loan as capital for some other investment at a higher rate of return.
My question: how is this any different, for example, from a company issuing bonds at 4% coupon rate and using the proceeds to fund operations when the company's profit margin is, say, 50%?
Let's say it's a matter of scale; I, as a person, can't issue bonds to trade on a public market. But I can get a mortgage and invest in other stuff hopefully at a return higher than the rate on the loan.
As I said, I don't understand how this is a "new era of finance".
The KSM is staked to ensure concencus of the network. proof of stake is like proof of work, but instead you are betting that this node is behaving and the node themselves are running cryptographic hash schemes like bitcoin. So like bitcoin, you are paid for validating the concensus of the network so you are paid that APR. Taken another step further, if you create a smart contract and lock the KSM in it, and that smartcontract stakes the coin for you, it can mint LKSM that proves your ownership in the pool. Slowly but surely the price of LKSM and KSM will diverge in LKSM's favor since the KSM in the smart contract is generating returns for being staked. So you can always redeem it with a slowly appreciating exchange rate. So all that to have a liquid form of staked KSM. You can now use the LKSM to mint AUSD and you can trust you can pay that back because you have colateral lockeed in a vault. Now when i participate n pools, I earn fees for providing liquidity of two assets. Now when people are trading, they can dip into the pool, swap their assets and no one has to be on the 'Other-side' of the trade. They get minimal slippage, and i get paid a trade fee that's much lower than what you can get in traditional finance (Usually fractions of a penny).
>how is this any different, for example, from a company issuing bonds at 4% coupon rate and using the proceeds to fund operations when the company's profit margin is, say, 50%?
It's nothing like that. Because A.) It's not getting people to loan me money. Company issuing bonds at 4% has to pay that 4% to get access to their assets because it's 'Risky'. In the blockchain there is no risk because they have constant oracle access to the price of the underlying asset so i can do it for free, with no counter party. Simple a piece of code collectively floating on thousands of nodes running around the world.
I think you don't understand interest rates. One man's interest is another man's cost of capital. If someone is paying you 4% for a riskless loan, it means they are overpaying for capital.
I have no experience with crypto, but this I don't understand.
> DeFi is unlocking the value of an asset, making it liquid...
Like a mortgage or a bond issuance (bonds are secured against assets of the corporation)?
> Credit is loaning you money and providing an interest rate. Usually something insane like 15%.
Average rate for a 30-year fixed mortgage in the US is about 4%[1]. Average Aaa corporate bond yield is 3.43%[2]. I guess that you are talking about interest rate on credit cards? I think that credit card debt is pretty small compared to the size of the mortgage or bond markets.
> One example is on Kaurura...
I'm not sure I follow you here, but it sounds like you get a loan at 19% APR against some collateral. Then you use the loan as capital for some other investment at a higher rate of return.
My question: how is this any different, for example, from a company issuing bonds at 4% coupon rate and using the proceeds to fund operations when the company's profit margin is, say, 50%?
Let's say it's a matter of scale; I, as a person, can't issue bonds to trade on a public market. But I can get a mortgage and invest in other stuff hopefully at a return higher than the rate on the loan.
As I said, I don't understand how this is a "new era of finance".
[1] https://www.valuepenguin.com/mortgages/average-mortgage-rate....
[2] https://fred.stlouisfed.org/series/AAA