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What purpose would somebody have to keep a significant percentage of their savings in USDC, which isn't subject to FDIC protections? The same logic would extend

What purpose would somebody have to keep a significant percentage of their savings in USDC, which isn't subject to FDIC protections? The same logic would extend to anything else that is a similar digital cash-equivalent. Given the purported 1:1 peg with the USD, there is no advantage to holding any cash savings in USD[C|T] form.

rglullis 5y ago
Because my main strategy for DeFI has been to (a) provide liquidity in Uniswap pools with tokens paired against USDC and (b) liquidity on Curve, where you stake USDC and DAI. I have had returns that are simply unmatched by any savings account, the liquidity pools with stabletokens help to reduce a lot of the volatility while generating some income from the collected fees, and if I there is any big downswings, I don't need to rush to cash out because most of my holdings are in stables. I know that I don't want to touch Tether, but if USDC is also deemed toxic, it forces me to reevaluate the risks of both USDC and DAI (which is basically 50% backed by USDC currently)
- xur17 5y ago
  > Because my main strategy for DeFI has been to (a) provide liquidity in Uniswap pools with tokens paired against USDC and (b) liquidity on Curve, where you stake USDC and DAI. It's worth pointing out that most pools with USDC on curve also expose you to USDT.
  - rglullis 5y ago
    Not the one from Compound. It is cDAI + cUSDC only. But to be completely honest, I am not on this anymore. I moved to the EURS/sEURS based one, as the CRV incentives are very good at the moment. Seeing how I was wrong about Circle status regarding audits, I need to do some more checks about the bank behind EURS.
    - akrymski 5y ago
      There's no free lunch. Returns on lending stablecoins are ~ 2X higher than a 5-year treasury bond atm because the risk is 2X higher that Circle/Tether will default vs the US-government over the next 5 years. Stablecoin returns aren't a miracle - you are effectively lending money to these organisations and taking on associated credit risk. For example there are many small banks around the world that will pay > 3% APR on USD deposits [1] https://nomadcapitalist.com/finance/highest-interest-rates-banks/ https://nomadcapitalist.com/finance/highest-interest-rates-b...
      - xur17 5y ago
        I'm not sure if I'm looking in the right place, but this [0] shows 5-year treasury bonds at 1.25% right now. You can get anywhere from 9% (blockfi, gemini, etc) up to 20 or 30% depending on where you look - much more than 2x. [0] https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/textview.aspx?data=yield https://www.treasury.gov/resource-center/data-chart-center/i...
        akrymski 5y ago
        Looking at Compound since it's DeFi [1] the rate is 2.6% CeFi platforms like Celsius or BlockFi can offer more, but they are just as risky as any unregulated sub-prime lender in a third-world country (eg micro-lending institutions can offer those sorts of yields too). The reason DeFi loans are much lower yield than CeFi loans is precisely because the risk is on-chain in the former case, so deposits can't be stolen. Not sure where you see 20-30% on USD? Those rates are an indication of a rug-pull scam or a ponzi imho. [1] https://compound.finance/markets/USDC https://compound.finance/markets/USDC

rglullis 5y ago

Because my main strategy for DeFI has been to (a) provide liquidity in Uniswap pools with tokens paired against USDC and (b) liquidity on Curve, where you stake USDC and DAI. I have had returns that are simply unmatched by any savings account, the liquidity pools with stabletokens help to reduce a lot of the volatility while generating some income from the collected fees, and if I there is any big downswings, I don't need to rush to cash out because most of my holdings are in stables. I know that I don't want to touch Tether, but if USDC is also deemed toxic, it forces me to reevaluate the risks of both USDC and DAI (which is basically 50% backed by USDC currently)

xur17 5y ago
> Because my main strategy for DeFI has been to (a) provide liquidity in Uniswap pools with tokens paired against USDC and (b) liquidity on Curve, where you stake USDC and DAI. It's worth pointing out that most pools with USDC on curve also expose you to USDT.
- rglullis 5y ago
  Not the one from Compound. It is cDAI + cUSDC only. But to be completely honest, I am not on this anymore. I moved to the EURS/sEURS based one, as the CRV incentives are very good at the moment. Seeing how I was wrong about Circle status regarding audits, I need to do some more checks about the bank behind EURS.
  - akrymski 5y ago
    There's no free lunch. Returns on lending stablecoins are ~ 2X higher than a 5-year treasury bond atm because the risk is 2X higher that Circle/Tether will default vs the US-government over the next 5 years. Stablecoin returns aren't a miracle - you are effectively lending money to these organisations and taking on associated credit risk. For example there are many small banks around the world that will pay > 3% APR on USD deposits [1] https://nomadcapitalist.com/finance/highest-interest-rates-banks/ https://nomadcapitalist.com/finance/highest-interest-rates-b...
    - xur17 5y ago
      I'm not sure if I'm looking in the right place, but this [0] shows 5-year treasury bonds at 1.25% right now. You can get anywhere from 9% (blockfi, gemini, etc) up to 20 or 30% depending on where you look - much more than 2x. [0] https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/textview.aspx?data=yield https://www.treasury.gov/resource-center/data-chart-center/i...
      - akrymski 5y ago
        Looking at Compound since it's DeFi [1] the rate is 2.6% CeFi platforms like Celsius or BlockFi can offer more, but they are just as risky as any unregulated sub-prime lender in a third-world country (eg micro-lending institutions can offer those sorts of yields too). The reason DeFi loans are much lower yield than CeFi loans is precisely because the risk is on-chain in the former case, so deposits can't be stolen. Not sure where you see 20-30% on USD? Those rates are an indication of a rug-pull scam or a ponzi imho. [1] https://compound.finance/markets/USDC https://compound.finance/markets/USDC