What Are DeFi Guarantees and Why Are They Essential?
The Decentralized Financial System (DEFI)guaranteedorcollateralUnlike the traditional financial system, which often depends on credit analysis and history, the loans and financial products at DeFi are predominantlySupercollateralizedThis means that in order to take a loan, the user needs to block as a guarantee a value in cryptocurrencies greater than the amount he intends to borrow.
If the value of the collateral drops significantly, the protocol can automatically settle it to cover the loan, protecting the liquidity providers.forwardHe used his reserves ofThe Sun(the cryptocurrency of the Solana network) as a guarantee to obtain a loan and finance aBuybackFrom its own actions, it is a practical and advanced example of this logic being applied in the corporate world. However, this movement also lit a warning about the risks involved when the guarantee is a volatile asset.
The Forward Case and the Volatility of the Collateral
The news on Forward illustrates a growing trend: the use of crypto assets asProductive GuaranteeBy using its SOL as collateral in a DeFi protocol, the company has accessed net capital without having to sell its assets, whileining exposure to the possible valuation of the SOL.Risk of liquidationAn abrupt drop in the SOL price could trigger the automatic settlement of the guarantee by the loan platform, potentially resulting in significant losses for the company. This case serves as a real study on the pros and cons of using volatile cryptocurrencies as the basis for leverage operations.
Risks and Challenges of Crypto Guarantees: From Volatility to Fraud
The use of cryptocurrencies as a guarantee is not exempt from serious challenges.High volatilityAssets such as Bitcoin (BTC) and Ethereum (ETH), although considered "blue chips", may undergo abrupt corrections, such as the drop of approximately 50% of BTC since its last historic peak, mentioned in recent analyses.
In addition to market volatility, the DeFi ecosystem is constantly facing the threat ofFraud and malicious tokensA recent and serious example was the warning issued by himself.The FBIThis case is a crucial reminder that when providing guarantees or interacting with any protocol, it is imperative to verify the legitimacy of the project, smart contracts and liquidity pools.
On-chain metrics and market health
To navigate these risks, investors and advanced users resort toOn-Chain MethodAnalysis of companies such asGlassnodeThey monitor the movement of funds, the long-term holders’ behavior and the levels of profit and loss realization.Dynamics of RecoveryIn Bitcoin, with capital flows showing signs of improvement, though still without a robust confirmation. For the hedge market, understanding these metrics is vital. A new influx of capital and a reduction in sales by old holders can signal a lower risk environment for leveraged operations, while the opposite requires extreme caution.
The Future of Guarantees in DeFi and Beyond
The crypto security market is constantly evolving.Real World Assets (RWA)Securities, real estate and digitized precious metals can bring a layer of stability to the system.Market forecasts“Prediction markets,” such as Kalshi – which recently raised $1 billion and reached a market valuation of $22 billion – show the expansion of the use of guarantee and settlement mechanisms for information and event markets, not just for loans.
In Brazil, this topic is gaining special relevance with the growing adoption of cryptocurrencies and the search for alternatives to passive income and access to credit. DeFi protocols that accept guarantees are already used by Brazilians, but require a deep understanding of the risks.Pricing of Oracles(which feed the protocols with the quotation of the guarantees), theRates of collateralizationand settlement procedures are the first step towards a secure participation in this new financial paradigm.
How to Protect Yourself When Using DeFi Guarantees
To mitigate the risks associated with the use of guarantees in DeFi protocols, users should adopt the following practices:
- Exhaustive research :Before using any protocol, check its audit, time of existence in the market, total blocked volume (TVL) and reputation in the community.
- Use Stable Assets as a Guarantee:Whenever possible, useStablecoinsLow volatility assets as collateral to reduce the liquidation risk.
- Maintain a robust safety margin:Do not operate on the minimum collateral limit. Use a rate significantly above the minimum required to support market fluctuations.
- Monitor their positions:Use warning tools to be notified about changes in the warranty price and the health of your position.
- Do not trust “miracle” offers:Tokens or protocols that promise abnormally high returns, as in the case of the fake FBI Token, are almost always scams.