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Comment by pushrax | Hacker News Reader

I'm new to this. Is the collateral locked into the contract and unspendable until the contract is closed?

It's also kind of unclear what the interest is from that page. edit: apparently it's 8.5% https://mkr.tools/governance/stabilityfee

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The interest rate varies based on collateral: https://oasis.app/borrow/markets. Eth is between 3-9% depending on liquidation ratios, and wBTC is at around 4.5% and both of these numbers are drops in the bucket when you consider that the collateral has appreciated a lot more than that.

And one more thing, it's not technically an interest rate, it's a stability fee (which btw, gets burned, used to go back to stakers, but they removed that).

Okay, so I suppose the stability fee is paid in MKR, and Dai's stability ultimately is regulated by people who buy MKR, and because MKR is burned by the CDP, people who buy MKR receive the "interest" indirectly due to deflation of MKR? Though MKR is independently traded and seems to move far more from trading than deflation.

It's just a smart contact vault, you can put collateral, take it out whenever you want, you just need to make sure that at any given point in time you have at least 150% of your debts value in collateral in the vault. This person is at over 400%, so very conservative borrowing, can withdraw some collateral.

There are also centralized versions with blockfi if you prefer traditional loans.

150% collateral (66.7% LTV) seems fairly risky for an asset like Bitcoin tbh

It handled the black swan event of complete market crash at the beginning of the pandemic pretty easily. And the other thing is Bitcoin's market cap is well over 1T$ now, as expected the volatility goes down as the market cap goes up. I suspect those ratios are going to come down significantly within couple of years.

I read a bit online after this, and saw various recommendations for people with CDPs to keep more like 300% collateral.

If it dips below 150% the contract is automatically liquidated. Should give ample time for the creditor to get their money back.

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