No, you pay for it with your assets. Someone else pays to settle your debt and get your assets.
Example. You have $1000 btc deposited in a lending platform, you can borrow up to 80%. You borrow $800 usd. You keep the usd no matter what. If btc drops to $850 then someone pays $800 (usd debt) and gets btc worth $850. The buffer is so assets never drop below debt value.
.... so you can... never borrow more than you already have? that seems like the exact opposite of a loan. Why not just keep the $1000 yourself and spend $800 of it? If you can't pay yourself back, then you're only out $800 instead of the $1000 in your example.
shane_b|4 years ago
Example. You have $1000 btc deposited in a lending platform, you can borrow up to 80%. You borrow $800 usd. You keep the usd no matter what. If btc drops to $850 then someone pays $800 (usd debt) and gets btc worth $850. The buffer is so assets never drop below debt value.
nightpool|4 years ago