When we have assets and debts, there are two conflicting things going on. Our assets are growing in value while our debts are accumulating interest. Enter: self-paying crypto loans.
Imagine if loans had no interest. Instead, the appreciation of your assets is automatically going to pay off your debts. Your mortgage payment is automatically paid off by your stock portfolio’s growth, and a car payment is paid by the funds of your high yield savings account. Your credit cards are paid off by your real estate portfolio, and all along the way, you don’t have to sell any assets to make the payments.
This may seem odd at first, but we are closer to this kind of entwined monetary system than most may think. There are new DeFi protocols that are attempting to allow anyone to borrow against their future asset yields, meaning they are creating self-paying crypto loans.
Alchemix is the most advanced of these platforms, where you can deposit crypto assets, borrow against them, and then have the future yield of these assets automatically pay off your debt. This system creates a loan where its value only goes down, and the collateral that you provide is never liquidated. The idea of self-paying loans is certainly an interesting one and may change how we think about money.
What Are Self-Paying Crypto Loans?
The concept is a new financial tool at its foundation. It’s blending both aspects of a lender and a savings account into one. You earn interest on your deposits even when you are also borrowing against them.
The interest that you earn is automatically used to pay down the loan amount, ensuring that the amount never increases, and because you are borrowing the same asset that is being used as collateral, your assets will never be liquidated.
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