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Borrowers pay a premium for the flexibility and speed of these kinds of loans. Unlike traditional credit positions that require extensive paperwork to set up, digital credit positions can be created instantly and securely thanks to overcollateralisation. One can think of this system as similar to inter-bank lending, due to its flexible and efficient nature. These credit markets function permissionlessly - anyone can join or leave as they please. The market mechanism is highly efficient at reaching an equilibrium since there are no barriers to entry or exit (for either borrowers or lenders). The current 8-10% yield represents a sustainable, stable equilibrium APY for low-risk digital credit.
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