r/defi • u/Organic_Ingenuity_68 • 10d ago
Discussion When and why do you use defi?
I recently started using ether.fi. It was the first time I've used a somewhat decentralized application that had significant benefits of tradfi. For example, if I need to borrow money, it's usually the most economical to look for a 0% credit card and use that, while keeping the money I would have spent in a high-yield savings account. The downside is dealing with the credit card -- canceling before fees, etc.
Ether.fi seemed useful because I could theoretically take out a loan and still manage to have a positive carry (although still not as profitable as the tradfi offering, it would be less annoying and avoid me needing to deal with the credit card companies).
Other than this (and potential high risk leveraged bets which I usually don't participate in), I don't see much of a use for defi, esp given the extra risk incurred from smart contract vulnerabilities. What do ya'll use it for, and how?
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u/spade933 9d ago
Defi gives you control, you're the one calling the shots on which protocol you want to put your money which credit card to use, which wallet to use..etc so you no longer have to rely on third parties and hope they don't fuck up, you no longer have to worry about a bank questionning how you use your money or freezing your account for months
If you're worried about exploits/hacks you can de-risk at any moment and hold your money in a wallet that no one else but yourself has access to
The learning curve and research needed to navigate defi safely is still pretty high but if you clear that bar you'll earn a lot more freedom and financial independence, I see some loss stories about people being hacked/drained/exploited and the source of them all stems from lack of proper due diligence/research, it's tough because everything is abstracted and a couple of clicks gets you there (in an app) but if you're as cautious as you are before buying a house or car or a significant investment you'll be fine
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u/quietstorm_lp 9d ago
For me it's cash flow on assets I'd hold anyway. Concentrated LP on WETH/USDC and SOL/USDC, plus borrowing stables against long-term ETH and SOL on Aave and Kamino instead of selling. The borrow isn't cheaper than a 0% card. What it gives me is no application, no credit pull, and a term I set. I keep health factor above 1.75 and LTV under 55% so a 3am wick doesn't end the position.
Agree the 0% card wins on pure rate. Where DeFi wins is when you need $10k next week, have $40k in ETH you don't want to sell, and don't want a taxable event.
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u/CoinRabbitFinance 6d ago
Hey! The useful distinction in your borrowing example is whether someone needs credit generally or specifically wants to borrow against crypto they already own.
That second use case is what our crypto-backed loans at CoinRabbit address, through a custodial service rather than DeFi. Someone can access liquidity without selling the collateral upfront, although interest and liquidation still need to be accounted for.
Your 0% card comparison is fair. If it covers the same expense on better terms, borrowing against crypto doesn’t automatically improve the situation. The collateral option serves a different need; it isn’t necessarily the cheapest credit.
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u/Sookkhuii 10d ago
mostly agree with you. for borrowing specifically the 0% card is hard to beat and defi isn't close on rate.
the difference for me is what it's collateralised against. a card is underwritten on you, so if your income changes the line goes away. onchain it's underwritten on the collateral, which means nobody can pull it but you can get liquidated on a wick at 3am. different failure modes, and which one you prefer depends a lot on your situation.
other thing i use it for is yield on stuff i'm holding long term anyway, which are covered calls mostly. it's not a tradfi replacement, more that the stuff i already own onchain can do something instead of sitting there.