COINBASE for Crypto has come

[vimothy]

But the overcollateralization seems to help secure their cashflow, in terms of risk minimization, as far as I understand.

how so?

 

[Clinamenic]

unless they're dodgy af, which is not a given

If they are, then they are masters at it. They market themselves as being maximally compliant, even playfully aiming to "compliantly take over the world."

 

[Clinamenic]

how so?

By minimizing the chances of default, which by extension minimizes the chances that the depositors' funds, which are used as capital to issue the loans, are lost.

 

[vimothy]

all good, but the obvs scam is obvs even if they're one of the good ones

 

[vimothy]

By minimizing the chances of default, which by extension minimizes the chances that the depositors' funds, which are used as capital to issue the loans, are lost.

yeah, but again, it doesn help them generate the cashflow needed to service their loans, it's just locked up value in case one of their debtors defaults

 

[Clinamenic]

all good, but the obvs scam is obvs even if they're one of the good ones

Yeah, and as far as I can tell, their profit model is sound, the risk well handled, and their business compliant with regulators.

 

[Clinamenic]

yeah, but again, it doesn help them generate the cashflow needed to service their loans, it's just locked up value in case one of their debtors defaults

The cashflow is generated by the interest paid by borrowers, as well as the profit from NEXO token sale and appreciation.

 

[Clinamenic]

The cashflow is generated by the interest paid by borrowers, as well as the profit from NEXO token sale and appreciation.

The latter arguably helping bootstrap this profit model from an otherwise circular catch-22 arrangement, which you seem to be pointing out.

 

[vimothy]

The cashflow is generated by the interest paid by borrowers, as well as the profit from NEXO token sale and appreciation.

thats exactly what I've been saying (minus the token bit)

 

[vimothy]

borrow at 2%, lend at 3%, hit the golf course at 5

 

[Clinamenic]

thats exactly what I've been saying (minus the token bit)

And the overcollateralization I think is integral to this profit model being sustainable, especially given how volatile the market it.

The best argument against overcollateralization is that it is capital inefficient as a practice, but I think thats an acceptable tradeoff given the security it seems to enable.

 

[vimothy]

at this stage it makes total sense I think, its v standard banking model when you think about it

 

[vimothy]

"classical" banking almost

 

[Clinamenic]

at this stage it makes total sense I think, its v standard banking model when you think about it

Yeah as I understand the two models, the big differences are that Nexo only offers overcollateralized loans, and the interest it pays to depositors is significantly higher.

 

[vimothy]

that might bother some ppl, eg cypherpunks who think this is a new paradigm

 

[Clinamenic]

and the interest it pays to depositors is significantly higher.

Which may not last, of course. But I don't see why, on a technical level, it can't be sustained.

 

[vimothy]

but these institutions are incredibly stable

 

[Clinamenic]

that might bother some ppl, eg cypherpunks who think this is a new paradigm

Yeah the cypherpunk ideal is largely misguided, or at least naive. That said, I think a good bit of the vision will come true, just not all of it.

 

[vimothy]

bitcoin or the blockchain or whatever will not end them

 

[vimothy]

Yeah as I understand the two models, the big differences are that Nexo only offers overcollateralized loans, and the interest it pays to depositors is significantly higher.

what's the other model?