Big problem nobody wants to price in: stablecoins as DeFi collateral.
If the issuer can freeze any coin backing your loan, that collateral isn't really yours or the protocol's. One blacklist call and the position is dead weight. Liquidations can't run, bad debt piles up, and lenders eat it.
Think about what that means:
• $USDC and $USDT can freeze addresses at will, and that includes smart contracts holding your collateral
• The protocol can be 100% solid and still get wrecked by one off-chain decision
• "Trustless lending" with a centralized kill switch under the hood is a design flaw, not a feature
We call it decentralized finance, but the base layer of collateral still answers to a compliance desk. Most people just haven't been on the wrong side of a freeze yet.
DYOR on what's actually backing your loans 👀
If the issuer can freeze any coin backing your loan, that collateral isn't really yours or the protocol's. One blacklist call and the position is dead weight. Liquidations can't run, bad debt piles up, and lenders eat it.
Think about what that means:
• $USDC and $USDT can freeze addresses at will, and that includes smart contracts holding your collateral
• The protocol can be 100% solid and still get wrecked by one off-chain decision
• "Trustless lending" with a centralized kill switch under the hood is a design flaw, not a feature
We call it decentralized finance, but the base layer of collateral still answers to a compliance desk. Most people just haven't been on the wrong side of a freeze yet.
DYOR on what's actually backing your loans 👀