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> No. The risk profiles on these products match that of Robhinhood, Wealthfront, or a Chase checking account (Genesis' custodial insurance policy beats the FDIC

> No. The risk profiles on these products match that of Robhinhood, Wealthfront, or a Chase checking account (Genesis' custodial insurance policy beats the FDIC's $200k ceiling). Biggest issue is that you don't own your private keys but that's not unique here. How are these companies providing 8%+ return on stable coins? They have loans at 4.x%, so they're not taking your coins, lending it, then returning part of the interest to you (like how traditional fiat banks work). With traditional banking the interest rate is closely related to bond rates and the federal reserve, but that's also not the case here. Theres no clear reason BlockFi can offer such a high rate. Thats a reason for me to be suspicious of the stability and risk profile of these compared to a savings account. If I could truly be confident in the stability of this, I would happily use this as a savings account. Also, they have insurance, but I'll believe its useful when its tested.

cinquemb 5y ago
> How are these companies providing 8%+ return on stable coins? Aave/Compound/Curve/Benqi <- decentralized non custodial overcollateralized lending protocols. These centralized and incorporated companies [basically a big bulls eye saying "please screw me over, here, I'll make it very easy for you for governments"] use Aave/Curve/Compound on behalf of their users who are too lazy/ignorant to do it themselves, plus maybe some economies of scale with cost of gas fee on ethereum. Right now on benqi (compound fork on avalanche), one can supply DAI and get 8.09% APY in DAI alone (there's more APY in other tokens but I don't like to count those since those incentives come and go), but it fluctuates based on borrower demand/pricing model used in the smart contracts [0]. By supplying DAI, using it as collateral to borrow more dai (up to 75% for dai, different collateral factors for non stablecoins, i think max 60% of collateral value, some with 0%[which means it cannot be used as collateral but it can be lent/borrowed, USDT is like this]) and then depositing it back in again, you can get more yield on that minus the borrowing costs if there are protocol rewards/incentives to be liquidated for more dai. There's also providing stablecoin <-> stablecoin liquidity on dexes and collecting fees on each swap. [0]: compounds jump rate model: https://github.com/compound-finance/compound-protocol/blob/master/contracts/JumpRateModelV2.sol https://github.com/compound-finance/compound-protocol/blob/m...

cinquemb 5y ago

> How are these companies providing 8%+ return on stable coins? Aave/Compound/Curve/Benqi <- decentralized non custodial overcollateralized lending protocols. These centralized and incorporated companies [basically a big bulls eye saying "please screw me over, here, I'll make it very easy for you for governments"] use Aave/Curve/Compound on behalf of their users who are too lazy/ignorant to do it themselves, plus maybe some economies of scale with cost of gas fee on ethereum. Right now on benqi (compound fork on avalanche), one can supply DAI and get 8.09% APY in DAI alone (there's more APY in other tokens but I don't like to count those since those incentives come and go), but it fluctuates based on borrower demand/pricing model used in the smart contracts [0]. By supplying DAI, using it as collateral to borrow more dai (up to 75% for dai, different collateral factors for non stablecoins, i think max 60% of collateral value, some with 0%[which means it cannot be used as collateral but it can be lent/borrowed, USDT is like this]) and then depositing it back in again, you can get more yield on that minus the borrowing costs if there are protocol rewards/incentives to be liquidated for more dai. There's also providing stablecoin <-> stablecoin liquidity on dexes and collecting fees on each swap. [0]: compounds jump rate model: https://github.com/compound-finance/compound-protocol/blob/master/contracts/JumpRateModelV2.sol https://github.com/compound-finance/compound-protocol/blob/m...