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We’ve all heard how revolutionary decentralized finance is. But at the risk of repeating the obvious, it is worthwhile to note the truly transformative role DeFi is set to play in the financial sector of the world.
First of all, DeFi, as the name suggests, is “decentralized,” meaning it is built on blockchain and offers financial services that would have been accessible only from centralized financial institutions like a commercial bank. This also means that anyone who is still not part of the traditional banking system can freely participate in the DeFi financial system, regardless of their “credit score” or past financial history. This is truly remarkable in that DeFi has the capability to bring in millions of underserved and unbanked people of the world under its wide umbrella.
And that is what forms the next step in the dismantling of the legacy financial system, which, unfortunately, benefits only a few.
Crypto loans offer the most enticing service of DeFi. The lender, in this case, always gets more yield in terms of interest on their crypto assets, while the borrower gets many opportunities to use the borrowed assets for a wide range of activities in which profits may be generated.
There are many DeFi platforms that allow the lending and borrowing of crypto assets, one of the major and most exciting parts of the DeFi ecosystem. Our team has created step-by-step instructional guides on how to participate in lending on the Kyber DAO, Fulcrum, Synthetix and DDEX platforms.
In this guide, we will explain how to borrow crypto assets from a DeFi platform. Torque is the borrowing platform of the bZx network and is built on their proprietary bZx protocol. We have already discussed their Fulcrum platform, which is their lending platform. Instead of hosting lending and borrowing on the same platform, they have created two different platforms for these purposes. Torque is their borrowing platform.
The Torque website claims that borrowing crypto from the platform is as easy as 1-2-3.
Let us take a look at how you can borrow crypto assets from the Torque platform.
A step-by-step guide to borrowing on Torque
1.Visit the Torque homepage.
The homepage announces boldly that borrowing crypto assets from the Torque platform is easy. Torque lends assets with indefinite terms loans and fixed interest rates. Also, no KYC or credit checks are required.
2. After scrolling down a bit, you will see a big blue button that says “Borrow.” When you click on it, it will redirect you to the app page - https://app.torque.loans/borrow
3. To start the borrowing process, you will have to first connect your crypto wallet to the Torque platform. By connecting your wallet, the Torque platform will draw its collateral from your wallet, while transferring the loan amount to it.
The Torque platform, just like the Fulcrum platform, gives you the option to connect a variety of wallets - MetaMask, Trust Wallet, Ledger, Trezor, Coinbase, etc.
We have created a step-by-step guide on how to open a METAMASK wallet. Let us connect ours to the Torque platform.
4. When you select the MetaMask option, the wallet will ask your explicit permission (through a series of notifications) to connect to the Torque platform.
5. After you have successfully connected your MetaMask wallet, you will see this page.
This page gives you all the information you need before borrowing the crypto asset of your choice. You will see individual interest rates for the different crypto assets that you can borrow from the platform. For instance, you can borrow ETH at 6%, DAI at 19%, USDT at 19% and MKR at 10% APR. These are ‘the fixed interest rates for an indefinite borrowing period.
Another interesting feature that you will observe is the Torque platform’s offer of farming rewards. When you are trading or borrowing through the platform, you are also earning vBZRX for as long as your position is open. These rewards are deposited weekly and you can check this on your staking dashboard. As of writing this guide, the reward percentage was a healthy 742%.
6. Now let us see how to borrow USDT. By clicking on the USDT option, the following box will open.
In this box, you can fill in the amount of USDT you wish to borrow. As soon as you input that amount, the platform will calculate how much collateral you will have to pay to the platform (this sum will remain locked for the duration of your loan).
Also, you have the option to select which crypto asset you wish to submit as collateral. All crypto assets that you borrow from the Torque platform can be kept as collateral. This is a distinguishing feature of the Torque platform.
7. After ensuring that all the figures are input correctly, all you have to do is click on “Borrow.” This will transfer the borrowed crypto asset (USDT in this case) to your wallet and your collateral (ETH in this case) will be locked on the Torque platform.
The collateral will stay locked until you return the loaned crypto back.
How DeFi platforms benefit lenders and borrowers
DeFi platforms allow lenders to earn a passive income on their crypto assets that would otherwise lay dormant in their wallets. But at the same time, they also allow borrowers the ability to short an asset by buying it on one exchange and selling it on another. This helps them benefit from margin trading.
Crypto loans also open up the exciting possibility of arbitrage trading for pro traders. This kind of trading can be done between users of a decentralized exchange and users of a centralized exchange. The trader borrows money at a lower rate than the DEX, trades it on a centralized exchange for a crypto asset and then lends the crypto asset to a DEX, earning themselves an arbitrage fee.
Wrapping up
Platforms like Torque (and its sister lending platform Fulcrum) are helping to fuel the DeFi movement with their easy-to-use processes and high-end security apparatus that protects and safeguards users’ assets.
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