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He is not really describing yield-farming here, he is describing what kind of price action happens when anyone can create a global, liquid, unregulated with jus
by Jommi 4y ago
He is not really describing yield-farming here, he is describing what kind of price action happens when anyone can create a global, liquid, unregulated with just a computer as a tool.
In the US, people can get 100-500$ just by creating a new bank account and deposting money into it. Some people do that, but then immedietly remove the funds once the bonus is paid out.
In reality, yield farming is just that, except in crypto:
https://www.reddit.com/r/churning/ https://www.reddit.com/r/churning/
It's people chasing bank / credit card marketing bonuses without really any thought of actually using those banks/credit cards in the long term.
This is the correct analogy.
- gregsadetsky 4y agoTo my knowledge, credit card / bank signup bonus are not marketed / packaged as asset classes. Learning that a non-crypto investment instrument was based on bank signup bonuses would be shocking to most, no? To me, that’s the source of the astonishment in the podcast. If what we’re talking about is built on non-sustainable foundations, fine. Call it that. But that’s the opposite of an investment opportunity.
- Jommi 4y agoYes, indeed this is credit card / bank signup bonus but it's actually giving you equity in the bank instead of pure USD. Yield farming is usualled called "mercenary" because of this, as instead of specualting, some instantly just sell whatever "equity" or token back into USD. Some prefer to keep the token and speculate on its value. Everyone is making their own decisions. >Learning that a non-crypto investment instrument was based on bank signup bonuses would be shocking to most, no? What do you mean by this?
- gregsadetsky 4y agoAs far as I understand (and from an extremely cursory google search), (crypto) yield farming is described as "An investing strategy". Not as a bonus on top of something else. i.e. the "bonus" is the only point. Your argument (again, afaik) was that yield farming should be likened to bank sign up bonuses. If I follow that argument: If someone were to tell me in the non-crypto world that there was a new "Investment strategy" and when I asked what it was based on, the answer was that my money would be used to pay people to open bank accounts to get the sign up bonus and that part of those bonuses would trickle back to me (making this, in some sense, "an investment strategy") -- I would run away. But maybe I'm taking the analogy too far :-)
- Jommi 4y agoYou have it slightly wrong - I guess that's why you think it's a ponzi. In Churning you're not paying anyone or forcing any to open up bank accounts to get the sign up bonus. You're signing up to bank accounts and credits cards yourself, getting the bonus, and then leaving the service onto the next one. --- In Crypto, you "sign up to the service" which can mean a whole variety of things. For example for an AMM it could mean providing liquidity on the USDC - USDT pair. As a marketing incentive, you start getting a "bonus" that is in the project's own token. Every time you earn some of that token, you take it and sell it on the open market for more USD. There are actually even "auto-compounders" that do this for you. This is yield farming. -- The point here is that in both cases you take something that is meant to be a marketing incentive, and make it into cashflow for yourself.
- gregsadetsky 4y agoI appreciate the explanation, thank you.