I think @kenny-crane summarizes it very well. Tax is one factor but I think the key factor is still getting that extra leverage with your crypto as collateral. This is of course highly speculative and people will need to understand the risk before taking on such extra leverage.

That aside, from the lender point of view, over-collateralization is actually much more prudent. Many of us are just seeing from the borrowers point of view. In DeFi, there is no concept of a credit rating, at least for now. Hence, as a lender, how can I be sure that the borrower can pay up? Over-collateralization is the answer for now.

This post has been manually curated by DeFi Campus. If you have not subscribed, consider subscribing to the community if you want to learn more about DeFi.