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what was the the business model of these platforms? did they lend out the staked money, or how did they generate these yields?

by pas 4y ago

CTDOCodebases 4y ago
The business model of Celsius was loan USD to people and earn interest. The loans were overcollateralised with the users Bitcoin. The problem is Celsius wasn’t content with just earning interest from loaning money so they invested their users Bitcoin in crypto projects that ended up going pear shaped.
silisili 4y ago
I have zero idea. I did get the correct APY for one month before withdrawing, paid no fee, and was left with the same question.
- imustbeevil 4y ago
  They may have a whitepaper or something, but the simplest way to generate higher returns in a bull market is just to use leverage. I can sell you an ETF that returns 2x the NASDAQ, and use the money to buy a 3x and pocket the difference. It looks like I'm giving you a better return than the NASDAQ, but when the market goes down everything obviously collapses because it's only designed to work in one direction. Of course, that sounds stupid as hell and you'd certainly hope that someone thought of something better, but this is exactly what happened with Terra/LUNA, except with more financial engineering to obfuscate the "if it goes down 25% we're fucked".
  - MockObject 4y ago
    > use the money to buy a 3x What's a 3x?
    - MauranKilom 4y ago
      Someone who is willing to enter a "NASDAQ will go up" bet with you, where they pay you 3x the amount it went up when it does, and you pay them 3x (or some other number you agree on) the amount it went down when it does.
      - MockObject 4y ago
        So, someone predicting a sudden downturn in a bull market?
        imustbeevil 4y ago
        QQQ is security that tracks the NASDAQ (NASDAQ 1% up = QQQ 1% up). TQQQ is a security that tracks the NASDAQ x3. (NASDAQ 1% up = TQQQ 3% up). SQQQ is a security that tracks the NASDAQ Inverse x3. (NASDAQ 1% up = SQQQ 3% down). In the context of "using leverage to provide better than expected returns in a Bull market", someone can buy TQQQ, securitize/create derivative (this is exclusively what crypto does) that returns 1.5 times the NASDAQ, sell you that derivative, and if the NASDAQ goes up 5% (TQQQ 15%) you get 7.5% and they get 7.5% (and your money). If it goes down, you lose everything and they keep the money you gave them.
tyrfing 4y ago
Step 1: get lots of venture capital (860 million) Step 2: give away money Step 3: somehow start making money Like most companies you'll see on HN, they are currently on step 2. The discerning reader may note that this sounds like a terrible use for $860 million - and if that's the case, how much of the other $642 billion last year was properly allocated?

what was the the business model of these platforms? did they lend out the staked money, or how did they generate these yields?

by pas 4y ago

what was the the business model of these platforms? did they lend out the staked money, or how did they generate these yields?

CTDOCodebases 4y ago

The business model of Celsius was loan USD to people and earn interest. The loans were overcollateralised with the users Bitcoin. The problem is Celsius wasn’t content with just earning interest from loaning money so they invested their users Bitcoin in crypto projects that ended up going pear shaped.

silisili 4y ago

I have zero idea. I did get the correct APY for one month before withdrawing, paid no fee, and was left with the same question.

imustbeevil 4y ago
They may have a whitepaper or something, but the simplest way to generate higher returns in a bull market is just to use leverage. I can sell you an ETF that returns 2x the NASDAQ, and use the money to buy a 3x and pocket the difference. It looks like I'm giving you a better return than the NASDAQ, but when the market goes down everything obviously collapses because it's only designed to work in one direction. Of course, that sounds stupid as hell and you'd certainly hope that someone thought of something better, but this is exactly what happened with Terra/LUNA, except with more financial engineering to obfuscate the "if it goes down 25% we're fucked".
- MockObject 4y ago
  > use the money to buy a 3x What's a 3x?
  - MauranKilom 4y ago
    Someone who is willing to enter a "NASDAQ will go up" bet with you, where they pay you 3x the amount it went up when it does, and you pay them 3x (or some other number you agree on) the amount it went down when it does.
    - MockObject 4y ago
      So, someone predicting a sudden downturn in a bull market?
      - imustbeevil 4y ago
        QQQ is security that tracks the NASDAQ (NASDAQ 1% up = QQQ 1% up). TQQQ is a security that tracks the NASDAQ x3. (NASDAQ 1% up = TQQQ 3% up). SQQQ is a security that tracks the NASDAQ Inverse x3. (NASDAQ 1% up = SQQQ 3% down). In the context of "using leverage to provide better than expected returns in a Bull market", someone can buy TQQQ, securitize/create derivative (this is exclusively what crypto does) that returns 1.5 times the NASDAQ, sell you that derivative, and if the NASDAQ goes up 5% (TQQQ 15%) you get 7.5% and they get 7.5% (and your money). If it goes down, you lose everything and they keep the money you gave them.

tyrfing 4y ago

Step 1: get lots of venture capital (860 million) Step 2: give away money Step 3: somehow start making money Like most companies you'll see on HN, they are currently on step 2. The discerning reader may note that this sounds like a terrible use for $860 million - and if that's the case, how much of the other $642 billion last year was properly allocated?