[guynamedloren]

> I guess the math for such a business is: - User deposits crypto worth X dollars. - User can take out up to X * Y dollars as a loan. - If the value of the crypto falls below X * Y * Z, it gets liquidated

My understanding is (deliberately) limited here but I have friends who participated in this or some other scheme like it, and the point is just purely speculative gambling. Take some slightly legitimate crypto token, take out a loan against it to buy shitcoin, rinse and repeat while hoping that everything goes up forever and/or you cash out right before everything comes crashing down.

[JonathanBeuys]

I think what you described is leverage.

You own an asset worth $100. You give away your asset as collateral to borrow $90. You buy more of that asset for $90. You give away your asset as collateral to borrow $80. You buy more of that asset for $80. Now, if the asset goes up/down in value, you earn/loose as much as if you invested $270 into that asset. Even though you only invested $100. The downside is that you have to pay fees to the lending service. And that you are exposed to counterparty risk.