4 ms·

In DeFi, most of the yield comes from speculators who are using your money as leverage to bet which cryptocurrencies will go up. It's not like a regular loan,

by amin 5y ago

In DeFi, most of the yield comes from speculators who are using your money as leverage to bet which cryptocurrencies will go up. It's not like a regular loan, whereby a company uses your money to expand, innovate, hire and train new employees, to build and sell something people want.

whitepaint 5y ago
So? You still earn way way more than what banks offer and you can withdraw at any point. It's been working very well for quite some time now.
- amin 5y ago
  1. If you think about it, there is no reason why banks should always offer free money to cash hoarders in the form of interest. During a recession, central banks lower interest rates to incentivize spending and productive investment, which benefits the rest of society. 2. DeFi yield relies on Greater Fools essentially gambling their money on cryptocurrency pairs. It might not last forever. I'd rather have 5% yield in corporate bonds, denominated in a currency that I can pay rent and groceries with, than 20% in a shitcoin which might be worthless tomorrow.
  - whitepaint 5y ago
    You can lend stablecoins such as USDC and have 3-10% APR returns.
- WJW 5y ago
  You can withdraw at any point, until suddenly you can't anymore. That is the very core of investing: being rewarded for taking the risk of not receiving your money back at all. In particular, the mechanisms most DeFi tools use are vulnerable to the contract being hacked and/or the devs doing a rug-pull. This is clearly a risk that most investors deem quite likely, because if it was a very low risk then the interest rate on DeFi products would not need to be quite that high.
  - whitepaint 5y ago
    $27,000,000,000 is deposited in AAVE's protocol alone. It's been working pretty well for quite a while now.
  - capableweb 5y ago
    > the mechanisms most DeFi tools use are vulnerable to the contract being hacked and/or the devs doing a rug-pull Wouldn't this mean that most DeFi would be hacked or rug-pulled by now? Seems the opposite is true, as only a small percentage of DeFi sees hacks and/or rug-pulls. Could you make the same argument you generally make towards banks as well? Seems like you could, and in that case you're just making an argument against investing in general, not against cryptocurrencies.
    - burnished 5y ago
      No, more like an argument that you'll see the exact same problems that got regulated with the banking industry. Like. You could make this argument.. in a history book. This has already happened.

by amin 5y ago

whitepaint 5y ago

So? You still earn way way more than what banks offer and you can withdraw at any point. It's been working very well for quite some time now.

amin 5y ago
1. If you think about it, there is no reason why banks should always offer free money to cash hoarders in the form of interest. During a recession, central banks lower interest rates to incentivize spending and productive investment, which benefits the rest of society. 2. DeFi yield relies on Greater Fools essentially gambling their money on cryptocurrency pairs. It might not last forever. I'd rather have 5% yield in corporate bonds, denominated in a currency that I can pay rent and groceries with, than 20% in a shitcoin which might be worthless tomorrow.
- whitepaint 5y ago
  You can lend stablecoins such as USDC and have 3-10% APR returns.
WJW 5y ago
You can withdraw at any point, until suddenly you can't anymore. That is the very core of investing: being rewarded for taking the risk of not receiving your money back at all. In particular, the mechanisms most DeFi tools use are vulnerable to the contract being hacked and/or the devs doing a rug-pull. This is clearly a risk that most investors deem quite likely, because if it was a very low risk then the interest rate on DeFi products would not need to be quite that high.
- whitepaint 5y ago
  $27,000,000,000 is deposited in AAVE's protocol alone. It's been working pretty well for quite a while now.
- capableweb 5y ago
  > the mechanisms most DeFi tools use are vulnerable to the contract being hacked and/or the devs doing a rug-pull Wouldn't this mean that most DeFi would be hacked or rug-pulled by now? Seems the opposite is true, as only a small percentage of DeFi sees hacks and/or rug-pulls. Could you make the same argument you generally make towards banks as well? Seems like you could, and in that case you're just making an argument against investing in general, not against cryptocurrencies.
  - burnished 5y ago
    No, more like an argument that you'll see the exact same problems that got regulated with the banking industry. Like. You could make this argument.. in a history book. This has already happened.