[latchkey]

This answer right here is, in my opinion, one of the most interesting use cases that is available today.

Provide collateral and take out a loan against that collateral. It allows people to act as their own bank. No longer do you have to go to a bank, ask for permission and then get approved for a loan. Now, you can do that yourself, instantly, without any trouble at all. Amazing really.

What are those loans used for today? Well, mostly it is about interest rate arbitrage and providing liquidity. As a super basic example, you can borrow funds at 2% and then lend them out again at 3% and make 1%. It is essentially risk free (assuming the contract doesn't have bugs/exploits).

The larger picture will be to enable people to be their own Kiva's. Crypto often is pushed to 'bank the unbanked', but it is more than just holding money. It is enabling people to borrow against their existing holdings, effectively allowing anyone, globally, to put their savings to work for them, without having to rely on a centralized banking system to do so. This might not be interesting for USA people, but it is especially valuable in countries that don't have a stable banking system.

[DropInIn]

Who is providing the finance and under what terms? How does rhat actually differ from banks or one of the many microfinance services predating crypto?

Now, the real kicker, what is the effective cost when _all_ fees are included, because someone has to pay for it and when combining the interest of non-traditional lenders and such fees I highly doubt it'll be cheaper.

[latchkey]

These are collateralized loans that are automated with "smart" contracts. Programmable money.

Who? Anyone who wants to provide liquidity. Is this different from existing solutions? Yes and no, the difference is that there is no human intervention here... you don't have to ask for permission. You're also dealing with a global pool of funds using open source technology, instead of just a single bank or service.

The only additional "fees" above the interest rate are the cost of a transaction on the block chain. There are certainly a lot fewer hands in the pot and overhead.

Learn more at one of the largest and oldest sites: https://aave.com

[DropInIn]

Who proves the collateral exists and is unfettered by existing contracts, specifically those provided through other platforms/existing mechanisms?

You see there is still a whole bunch of steps left out.

[latchkey]

It is baked into the contracts and the way that the networks and protocols work. The general idea isn't super complicated though.

You have tokens, they sit in a wallet that you control. Let's say you own 10 ETH. Then that is in your wallet. Those ETH are mathematically provable to be in your wallet.

In the case of AAVE, you send your tokens to their contract, they give you back a receipt token which represents how much they owe you. Once your tokens are in their contract, you are free to borrow against the value that is locked up. If you get liquidated due to not maintaining your loan ratio, AAVE just keeps your tokens and your receipt tokens are then invalid.

There aren't any steps left out. It is really on you to read the documentation and bring some understanding around how all this works. I'll point you here: https://docs.aave.com/hub/

I googled and found another good article for you: https://www.leewayhertz.com/how-defi-lending-works/

[DropInIn]

Just ignored my questions to give the standard allusions rants....

"proves the collateral exists" means who validates the asset doesn't have a standard run of the mill contract/lien/etc?

Just answer that, and _actually_ answer it (the site sure doesn't in any reasonable nor concise manner) and we'll go from there.

[dbmikus]

The collateral provably exists because blockchain code is public and ownership is secured via cryptography.

Are you asking about an off-chain asset that is brought on-chain? For that, you are correct you need to rely on a socially trusted institution that attests that the off-chain asset isn't actually owned by someone else.

There are some off-chain assets that are tokenized and are very trustworthy, IMO, such as USDC. And then there are a number of purely on-chain assets, such as ETH, MATIC (Polygon), and coins that power protocols like Uniswap and Aave and give the owner of those coins a right to dividends. The blockchain proves ownership of purely on-chain assets directly through cryptography.

I do want to add, you are being pretty combative here towards someone that was genuinely answering your questions.

[latchkey]

> standard allusions rants

Oh, I see, you just want a hostile battle and don't want to do any sort of actual conversation around knowledge you refuse to learn on your own.

> "proves the collateral exists" means who validates the asset doesn't have a standard run of the mill contract/lien/etc?

I don't understand this line at all.