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If there is only one investment vehicle (other than the stock market) that offers considerably higher returns than everything else, then that vehicle carries pr
by TomVDB 5y ago
If there is only one investment vehicle (other than the stock market) that offers considerably higher returns than everything else, then that vehicle carries pretty by definition a much higher risk than you seem think it does.
- boring_twenties 5y agoStrictly speaking, the returns only indicate a higher perception of risk, which may not necessarily translate to the same amount of actual risk. As far as I can tell, the risks of depositing stablecoins in something like Uniswap or Compound are the following: 1) The stablecoin might not be redeemable 1:1 for fiat in the future. Personally, I think this risk is negligible for USDC and minimal with DAI. 2) The smart contract code might have bugs leading to loss or theft of the deposited tokens. I think this is minimal with Uniswap or Compound. It's significantly higher with some other providers (which do seem to offer higher rewards, but not enough for my taste). 3) High Ethereum gas fees could make it very costly to withdraw your funds in the future. So far, I have seen these fees spike as high as US$200-300, but only for a brief period of time. Usually they settle back to $20-50. This might be the highest risk but is still acceptable, to me, anyway. Taken together, these risks are well worth getting ~5% instead of 0.1%, to me. YMMV, of course.
- trophycase 5y agoNot necessarily. While I agree it is riskier, I think there's an argument to be made that higher returns can also come from an arbitrage on information/regulatory hurdles/slow moving corporations.