Getting Started with ETH-Backed Loans on Coinbase

Sometimes you have to sell crypto to cover expenses. That's life. The downside of course is that afterwards you have less crypto, plus those sales trigger a taxable event.

These pain points make DeFi borrowing very attractive.

Instead of having to travel somewhere, fill out paperwork, and deal with credit or put up your IRL property to secure a personal loan, you can borrow permissionlessly with DeFi in minutes, and from the comfort of your phone, by collateralizing your crypto in smart contracts.

This way, you can borrow a stablecoin like USDC and spend it like you would cash without selling your underlying holdings. You get purchasing power while keeping long-term exposure, and personal loans like this aren't considered taxable income in the U.S.

This DeFi model is powerful, but venturing out onchain isn't for everyone. I have family and friends who hold ETH on CEXs, and would be inclined to use DeFi tools, but aren't confident enough yet to navigate onchain apps on their own.

That's perfectly fine. Not everyone should have to be a frontiersman to access the benefits of DeFi. And increasingly they won't have to be, as we see more and more mainstream apps embrace the DeFi Mullet: fintech in the front, DeFi in the back.

A fresh example of this came last week when Coinbase debuted ETH-backed loans powered by Morpho.

This is an integration I can happily recommend to my family and friends, as Coinbase is one of the most trusted and easy-to-navigate crypto exchanges, while Morpho is one of the most proven and dependable DeFi lending protocols.

With this integration, you can now borrow against your ETH without having to leave the comfort of the Coinbase app. And this is very easy to do. Assuming you already have some ETH holdings on Coinbase, you just:

1. Click on your ETH balance to bring up your Ethereum dashboard.
2. Scroll down to the "Borrow" tab and press "Start."
3. Review the primer info — i.e. your Borrow up to amount (based on your ETH deposited to Coinbase), the Variable rate (the fluctuating interest Morpho will charge on your loan), and the Liquidation LTV (the "loan-to-value" point at which your underlying ETH could be liquidated for repayment) — and then press "Continue."
4. Once you arrive at the borrowing interface, input the amount of USDC you want to borrow, then click "Review loan."
5. Check one last time that your loan details are satisfactory. When you're ready press "Borrow now," then "Accept and continue." After this, your loan will be submitted, though it may take a minute or two to finalize in Coinbase's UI.

Voila, that's all it takes to get started!

If you do open a loan like this, you can navigate to your Coinbase "Cash" tab and in the "Borrow" section you'll see a "Manage Loans" button. Go here for the "Repay" option to pay back the USDC you borrowed over time.

These ETH-backed loans have a flexible term, so you don't have to pay back specific amounts per a specific schedule. Just repay whenever in whatever amounts suit you, though keep a close eye on your loan health to avoid liquidation.

Also, keep in mind that USDC borrowed on Coinbase can't be used for buying crypto on Coinbase, so this particular avenue is meant for cashing out and spending.

As far as DeFi onramps go, this integration is about as simple and safe as it gets. If you or someone you know hasn't gotten around to borrowing against ETH yet, this is certainly a good place to start.