Let's talk about short selling in a simple and understandable way.
Let me tell you a story:
I accidentally obtained a shiny card on Steam, and I wanted to sell it to make 16 dollars.
Then there was a guy who also wanted to sell his card, and he was bidding against me for several days.
I set my price at 16, he set his at 15.8. Today I set mine at 13, he set his at 12.89, and in the end, I withdrew and set it at 11.
Because in this market, it seems like no one is buying at that price, so we gladly bid against each other to be the first one to sell. The final outcome of my bidding against him is that I will likely force him to cover his position at around 9 or 8 dollars, and then suddenly place a buy order to buy his card, selling both together for 16.
So how does this relate to short selling?
You need to have an 'item' to sell. In short selling contracts, you are essentially using margin collateral to the person who lent you the tokens, and they will earn the interest on the borrowed tokens that you pay.
Financial markets are quite risky.
The person holding the tokens that are lent to you assumes the risk of the token price dropping (profit: interest on borrowed tokens (for him, it's wealth management) + potential gains from the token's price increase).
The short seller assumes the risks of borrowed token interest, fees, and price increases (profit: the price difference from the token dropping).
Holding tokens actually counts as a 1x long position.
They say longs and shorts are like sharks, but in reality? You're borrowing something from your opponent. Hahaha
So do you know how to short sell without using contract features? Although I don't recommend this (it's related to forced liquidation).
