It appears that Coinbase was going to achieve that 4% interest on USDC in Lend via Compound [1], which is a DeFi protocol they helped launch a few years ago [2]

It appears that Coinbase was going to achieve that 4% interest on USDC in Lend via Compound [1], which is a DeFi protocol they helped launch a few years ago [2]. However, it is not clear why they said "Your principal is guaranteed", since they didn't say how, and that is a pretty big claim. I'm guessing, since they didn't really specify, but assets lent in Compound (and other DeFi protocols) are generally over-collateralized [3][4], to protect loss of funds, so maybe they were relying on that. However, even with that, funds in DeFi protocols could still be affected by things like impermanent loss [5]. That said, maybe they were just relying on some insurance thing. [1] https://blockworks.co/coinbase-compound-labs-launch-usdc-high-yield-accounts/ https://blockworks.co/coinbase-compound-labs-launch-usdc-hig... [2] https://techcrunch.com/2018/05/16/cryptocurrency-compound-interest/ https://techcrunch.com/2018/05/16/cryptocurrency-compound-in... [3] https://www.gemini.com/cryptopedia/what-is-compound-and-how-does-it-work https://www.gemini.com/cryptopedia/what-is-compound-and-how-... [4] https://academy.binance.com/en/articles/what-is-compound-finance-in-defi https://academy.binance.com/en/articles/what-is-compound-fin... [5] https://academy.binance.com/en/articles/impermanent-loss-explained https://academy.binance.com/en/articles/impermanent-loss-exp...