You learn everyday!
This is interesting feature that I learned from waterloan.finance.
Waterloan.finance is also a new DAPP in #smartBCH ecosystem which offers lending and borrowing features. I never tried borrowing from a DEFI app before so this is kinda new to me. I am familiar with most of the Dexes in #smartBCH ecosystem but these DEXes are mostly clones of each other with the exception of Mist, Tango, Benswap and hopefully, Tropical.
Today, I have extra 51 Flexusd in my Metamask and decided to give it a try.
Step 1. I deposited 51 Flexusd in the DAPP (www.waterloan.finance). As depositor, you lend your money to the platform and you get 10.4% APY. You also get the WAT, which is the governance token, every time you make a transaction.
Step 2. So I want to try borrowing and I read that the my deposit will be used as collateral. I am fine with this because my deposit is a stable coin and I think it will not have a risk of getting liquidated because the value wont go less than $1.
So, I selected the borrow tab, and it showed me that I can only get 5.1 Flexusd for my 51 Flexusd deposit. This is about 10% but the interest for borrowing is 17%. Since this is smartcontract, I am assuming that the interest rate will be charged against my deposit interest rate.
So how much is the interest for my 5.1 Flexusd loan? Just trying my math here but I do not know if it is correct:
Borrowed: 5.1 Flexusd
Interest Rate: 17% or .867 flexusd.
Total: 5.1 + .867 = 5.967 (total amount that I will pay back)
Do you think this is a good investment strategy, borrowing against your crypto then using the borrowed money to buy more crypto?