[jnordwick]

Why wouldn't you just sell the eth in the first place?

I havent read the whitepaper yet (i will this weekend), but it seems like the collateral is essentially locked up in the contract, so you lose any interest or other opportunity cost.

Even with only current instruments you could synthetically create this loan for cheaper: sell the BTC collateral for USD, buy futures to cover the BTC, invest the unused USD to collect interest..

The problem is that the collateral is locked in the contract and that collateral is another liquid currency.