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Do you consider earning interest to be speculation? I can put stablecoins (crypto dollars) in a lending protocol like Aave and earn ~10% APY. Compare that to m

by dmihal 5y ago

Do you consider earning interest to be speculation? I can put stablecoins (crypto dollars) in a lending protocol like Aave and earn ~10% APY. Compare that to my savings account, which pays out 0.25% APY. Or how about the stablecoins themselves? MakerDAO creates the Dai stablecoin, backed by crypto-native assets like ETH & BTC. I have a number of friends in Argentina who are surviving hyper-inflation by keeping their wealth in stablecoins.

dash2 5y ago
Earning 10% "riskfree" isn't speculation, it's a Ponzi. What serious borrower needs to pay 10% to access credit? So then, who are the borrowers who are paying this interest? As they say on Reddit: !remindme 1 year.
- mratsim 5y ago
  Arbitragers gladly pay 10% of their risk-free income to lenders to execute an arbitrage opportunity.
- dmihal 5y ago
  > What serious borrower needs to pay 10% to access credit? People who can make more than 10% trading? Lending protocols aren't doing anything different than what banks do: allocating inactive capital to those who can make use of that capital and are willing to pay for it. Interest rates are high because of A: market volatility, professional traders can easily make more than 10%, and B: information asymmetry, large capital pools haven't allocated to these pools.
  - dash2 5y ago
    If you can reliably make more than 10% trading, you can borrow from a bank. Or Goldman Sachs. Or whoever. The current interest rate is practically 0. Anyone who is borrowing at 10% is either (a) not very bright or (b) more likely, doing something risky with their money that reputable moneymakers won't touch... probably involving the blockchain. So yeah, Ponzi.
  - MrMan 5y ago
    It is super anomalous financial behavior to seek out the highest cost funding though.
- terrortrain 5y ago
  It's not a ponzi. Lookup what a ponzi scheme is.
sickygnar 5y ago
That 10% isn't remotely risk-free. All the combined lending/defi/erc20 smart contracts are held together by paper clips and rubber bands. The popular ones have been stable so far but there is a proven history of hacks and exploits in crypto in general.

by dmihal 5y ago

dash2 5y ago

Earning 10% "riskfree" isn't speculation, it's a Ponzi. What serious borrower needs to pay 10% to access credit? So then, who are the borrowers who are paying this interest? As they say on Reddit: !remindme 1 year.

mratsim 5y ago
Arbitragers gladly pay 10% of their risk-free income to lenders to execute an arbitrage opportunity.
dmihal 5y ago
> What serious borrower needs to pay 10% to access credit? People who can make more than 10% trading? Lending protocols aren't doing anything different than what banks do: allocating inactive capital to those who can make use of that capital and are willing to pay for it. Interest rates are high because of A: market volatility, professional traders can easily make more than 10%, and B: information asymmetry, large capital pools haven't allocated to these pools.
- dash2 5y ago
  If you can reliably make more than 10% trading, you can borrow from a bank. Or Goldman Sachs. Or whoever. The current interest rate is practically 0. Anyone who is borrowing at 10% is either (a) not very bright or (b) more likely, doing something risky with their money that reputable moneymakers won't touch... probably involving the blockchain. So yeah, Ponzi.
- MrMan 5y ago
  It is super anomalous financial behavior to seek out the highest cost funding though.
terrortrain 5y ago
It's not a ponzi. Lookup what a ponzi scheme is.

sickygnar 5y ago

That 10% isn't remotely risk-free. All the combined lending/defi/erc20 smart contracts are held together by paper clips and rubber bands. The popular ones have been stable so far but there is a proven history of hacks and exploits in crypto in general.