Rajarshi Mitra
Independent Analyst
- Lending protocol Aave has rolled out a new service on Ethereum that lets users take out loans without collateral.
- Users who deposit an asset on Aave can now “delegate” a credit line to another person.
- The parties involved in the process must sign a legal agreement that defines the terms of the loan.
- LEND/USDT has dropped below the upward trending line.
Aave lending protocol has unveiled a new service on Ethereum, which allows users to take out loans without collateral. Aave founder and CEO, Stani Kulecho, took to Twitter to explain how users who deposit an asset on Aave can now “delegate” a credit line to another person. He explained that if user A deposits USDT and delegates their credit line to user B, B can withdraw ETH from Aave without collateral.
Decentralized protocols generally require users to put down more collateral than what they wish to borrow. For instance, MakerDAO asks borrowers to deposit at least $150 ETH for every $100 in Dai they borrow. On the other hand, Karen and Chad would sign a legal agreement stipulating the terms of the loan, including the interest rates and deadlines for repayments. This would be done using a smart contract system developed by OpenLaw, a ConsenSys-backed firm that develops blockchain-based legal agreements.
OpenLaw co-founder, Aaron Wright, said that having an automatically generated contract “gives it the weight of the real world, not just the crypto world.” According to Wright, this approach can make the DeFi space more attractive to traditional players.
As we are thinking about these protocols and watching them scale and handle real money — not the comparatively small amounts that flow through Ethereum today but the larger amounts that we see financial institutions grapple with on a daily basis — those rights and obligations become more and more important.
LEND/USDT daily chart
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LEND/USDT fell after encountering resistance at the 0.1921–level. Presently, it's priced at around 0.18417 and has dropped below the upward trending line. The RSI indicator still shows that the price is overvalued, so further drop may be expected.
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