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Blockfi was paying around 8% in stable coins, if I remember correctly. I think their plan was to invest the money and make more than 8% and pocket the differenc
by bufferoverflow 4y ago
Blockfi was paying around 8% in stable coins, if I remember correctly. I think their plan was to invest the money and make more than 8% and pocket the difference. That's pretty hard to do in a down market.
Or they were a ponzi scheme all along.
- deleted 4y ago[deleted]
- bko 4y agoHaving a spread between cost of borrowing and net return is how banks make money. Pay deposits X% while earning Y% on said deposits, where Y > X. Another way to make money is to buy collateral earning Y% and apply a structure on top of it and sell the product as yielding X% and pocket the difference, where Y > X. All structured products (e.g. MBS, CLOs, ABS, CDOs, etc) essentially work like this. They wouldn't necessarily need to borrow money to do that. The naive play was using something like TERRA to earn 20% and pass through 8% to the depositors. But the spread amount itself should have raised eyebrows. If someone is paying you 20%, you're taking some kind of risk. And the worst kind of risk is risk you don't understand
- Proven 4y ago