[Daily] Polygon is the gaming king

Good morning! Welcome to The Daily Moon. It's a brand new week. Free speech champion, Elon Musk, shadow banned Substack over the weekend. The social media platform now doesn’t allow its users to engage with tweets, which link out to the newsletter platform. Let’s hope this was just a bug and not a brand new feature.

Moving on, today we talk about crypto's acceptance as a collateral and Polygon’s change in fortunes.

As of Sunday, 1PM IST

The markets were volatile over analyst estimates of another rate hike in the US. Bitcoin was bearish over token transfers from whale wallets to exchanges. Ethereum continued to see profit booking ahead of the Shanghai update. S&P 500, Nasdaq, Sensex, and Nifty were closed for Good Friday.

Can Crypto Get You A Loan?

Say you want to buy a car but don’t have the money. What do you do? Take a loan, yes. But that means you have to deposit something as collateral. Property, gold, and bonds used to be among the acceptable assets. Now, crypto is on the list too.

Cash loans are being given out using crypto such as BTC and ETH as the guarantee. Similar to regular mortgages, you deposit a fixed amount of tokens with the lender and get cash. Once you repay, the token is returned.

The lender gets crypto collateral that can be tracked round the clock and you get the loan. It especially makes sense if you are a HODLer and the tokens are lying idle. This is another use case for crypto that has already made its way into mainstream finance.

How does it work?Crypto guarantee for loans is just like TradFi. The bank or financial institution giving you the loan wants an asset as surety, crypto in this case. Here:

• You select the loan amount

• The lender decides the required crypto collateral

• You deposit the collateral and get cash

But like any other loan, you will be charged an interest rate payable monthly. The quicker you pay off the loans, the lower is the interest rate.

Here's an example where ~9BTC is the required collateral for a $100,000 loan.

Credit quality checks are done away with because your crypto value is all that counts. In most cases, the lender owns your crypto till the time you repay the entire loan. But newer models have been built where you can also trade your collateralised crypto.

Who’s offering it?Some DeFi platforms were the first ones to offer crypto mortgages. But these were loans given out in crypto and not useful for users in need of cash.

Since the past year, it has found a lot more takers. Goldman Sachs tested it in 2022 when it gave out cash with Bitcoin as collateral. It looked attractive to the investment bank because unlike TradFi, BTC traded 24/7, 365 days of the year.

Any pitfalls?If your crypto is deposited with a lender, you may not be able to make money during bull runs. Besides that, there are a few disadvantages:

1. The lender will take over your crypto collateral if you don’t pay the loan on time.

2. You may lose your crypto if the lender goes bankrupt.

3. Because it’s a regulatory grey area, if lawmakers pass legislation, you may lose access to your assets.

As always, DYOR. Compare products and find out how much you save. Now that regulated entities have entered the fray, you can make your locked crypto work for you.

Polygon Is Making It

The company had been feeling the heat for a while but it has now emerged as the second largest gaming network in the world.

What are the numbers?Its customers’ gaming wallets started to engage with games. In fact, the number went up ~50% from February to March. Polygon has now left Hive and BNB Chain in the dust.

How did it get there?A game — Hunters on Chain — seems to be creating the hype. This game was launched in January and has been steadily growing its user base. Now, to purchase in-game NFTs, users have to open their wallets and Polygon’s making the money. In March the number of users playing the game shot up. It could be because the game has hit a user cohort that finds it fun or the rumours of an in-game NFT sale that caused it. We’ll know next month.

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