There are undercollaterized / no collateral loans on Ethereum. You can build a credit score using decentralized identities. But yeah, keep dismissing it. You'll eventually use Ethereum or something like it whether you want to or not.
The advantage eventually will be easier ways to get funding for startups or businesses of all kinds. You need highly liquid markets in order to facilitate global finance at scale so that's where it's starting today. Rebuilding all of the financial primitives onchain. Why? Because composability of contracts onchain results in higher velocities of money; higher than whats possible in traditional finance. Imagine a world where you can list ownership of a stock and have that be immediately accessible by millions of people around the world regardless of jurisdiction 24/7 in highly liquid markets, all from a browser app. That's where this is going in my opinion.
None of this makes any sense at all. Composability of contracts leads to higher velocity of money? Where do you get this from? And why do we want higher velocity of money? The only people who care about velocity of money are macroeconomists. Velocity of money has literally zero impact on businesses and individuals.
Velocity of money follows the equation V = P*T/M Where P = price level; T = aggregate value of transactions per delta t and M = total nominal amount of currency in circulation.
With DeFi, you can increase T because the aggregate value of transaction per delta time increases thanks to composability of money. In the traditional system, locking up money means buying an asset where that value then becomes illiquid (like buying shares of a stock, or a bond). However in DeFi, that same asset can be tokenized and used as liquidity as a tokenized collateral. For example, I can tokenize a TSLA share and then use that as collateral in a contract where I can get a yield. I could also pair TSLA with a stablecoin as a liquidity position (1:1 TSLA/USD) and tokenize the liquidity position which can then be used in other contracts.
The total aggerate value per unit time increases thanks to composability of contracts. You should download Metamask and use DeFi, it'll become clear what I'm talking about.
You want higher velocities of money because then that value is being put to work. When you have low velocities of money it means you have hoarding behavior which leads to deflation and a shrinking economy. With DeFi, the same value is more efficient than the traditional system because that value can be allocated more efficiently (i.e. higher yields thanks to tokenized positions and composable contracts), thus you get more bang for your buck so-to-speak.
Also, just having something like Uniswap with pooled liquidity means assets are more liquid, which also increases velocity of money. More liquidity = higher velocities of money. This is how you bank the unbanked, by giving everyone access to financial markets as long as they have an internet connection.
Uh no, Aave has credit delegation for no collateral loans and it uses OpenLaw contracts to secure a credit line. And there's also TrueFi https://truefi.io/. And a bunch of others. You can get loans based on credit on Ethereum.
No, what I'm saying is that right now if you have a product on Ethereum with consistent cashflows, you can borrow money on credit from DAOs with large treasuries willing to lend them out using OpenLaw contracts as arbitration. The goal for these protocols is to expand this using decentralized identities and onchain credit scores.