You need a short term loan of $100 for something but you do not wanna sell off your HIVE because you think the price will increase in the short term. You use your HIVE as collateral for a $100 loan. Now you have the $100 you needed and you still own your HIVE. When you pay the loan back, you get your collateral back.
That would be the jest of it. It's a standard model for crypto lending used by platforms like Nexo, crypto.com, Celsuis, etc. I'm trying to introduce it to HIVE 😃
What I don't understand is the fiat transfer. I put the HBD as collateral, but how do I end up with $100 Fiat?
We dont accept HBD as collateral, we issue loans in B tokens which can be converted to HBD in your HIVE wallet.
We dont transfer fiat. If you look at the "BearBonds Loaning and Repayment process" and "How bearbonds (B) tokens interact with your HIVE and hive-engine wallet" pictures from above.
I'm sorry, I still don't understand. I have $100 worth of Hive. I send it to you. You send me $100 of Bear Bonds. How do I turn the Bear Bonds into fiat? Then once I have fiat, I pay that back later by converting it to Hive or HBD and send that to you?
You have $100 worth of Hive, SPI or Leo. You send that to @bearbonds, that sends you $100 worth of Bear Bonds - these represent the loan.
You send the Bear Bonds to @bearbonds which releases $100 worth of HBD to you. You have many choices now:
At the end of the loan period, assuming your original tokens have held their value, you buy sufficient Bear Bonds to repay the loan and send them to @bearbonds to release you Hive, SPI or Leo.
You can also buy Bear Bonds weekly during the loan period using the recurring payment mechanism on Hive, so you are gradually putting aside the amount to repay the loan.
Thank you! What was tripping me up was what happens to the Bear Bond tokens. I thought I held them, but I understand that those go back to you in exchange for the HBD. Then I can buy new Bear Bonds when the the term is up, send those to you, and have the Hive returned to me. I appreciate you taking the time to review it with me. While you hold 2 times in collateral, a big market downturn could be a loss for you, correct? Assuming, that the borrower chose not to repay.
Well, the agreement is that the collateral is sold if it loses 50%, so hopefully, not too big a loss and not too often.