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BlockFI was offering 8.5% APY on deposits. FTX was offering 8% A true exchange, where you just buy and sell, will never pause withdrawals because they won't be

by shmatt 4y ago

BlockFI was offering 8.5% APY on deposits. FTX was offering 8% A true exchange, where you just buy and sell, will never pause withdrawals because they won't be acting with these ponzi-like methods A decentralized exchange won't give you free money, so less people will use it. Also the same with a centralized exchange offering you 0% APY and full liquidity at all times. You could build one, but will people sign up?

dragontamer 4y ago
> A true exchange, where you just buy and sell, will never pause withdrawals because they won't be acting with these ponzi-like methods Coinbase is also offering APY on its deposits through Coinbase Rewards, as does Binance. This "true exchange" sounds like the no-true-Scotsman fallacy. Literally no one does what you claim. Everyone in the cryptocoin world is doing this "staking" == crappy loans / bonds business.
- shmatt 4y ago
  I mean, what are they doing to generate you that money, and how safe is it? FTX gave customer deposits to Alameda, without much knowledge I'd guess they wanted Alameda to generate that 8% APY, but customers weren't in the know "literally no one does what you claim", except in the FIAT world, which I see crypto enthusiasts claim FTX was under just as strict government oversight as a FIAT exchange/bank If your point is to say, even Coinbase are risking traders money, then yeah they are. If someone were to build "the TD ameritrade" of the crypto world, I guess they'd fail because they aren't giving away free money
- dibt 4y ago
  >Coinbase Rewards You are referring to staking. FTX was giving a static yield on deposits. The funding for this came from their marketing budget. Very different from what Coinbase does. >"staking" == crappy loans / bonds business. Staking is not a loan. It is a component of proof of stake networks to maintain security. Coinbase provides stacking services, but all they do is pass the yield onto the customer while taking a cut for the resources required for staking (e.g. AWS bill). Some token networks may market a mechanism as "staking" when it's just a way to keep people from selling. That's a different topic.
  - dragontamer 4y ago
    > Staking is not a loan. Yes it is. You give your money over to another organization, and that organization promises a % yield / APY in return. You aren't allowed the money back until later. Its totally a bond. > Some token networks may market a mechanism as "staking" when it's just a way to keep people from selling. That's a different topic. I'm feeling some "no true Scotsman" fallacy here. If those guys call it staking, then its staking.
    - zoklet-enjoyer 4y ago
      Look up how consensus works on proof of stake blockchains. Specifically Tendermint chains, Ethereum, Tezos, Algorand.
      - dragontamer 4y ago
        Just because its a complicated loan/bond doesn't mean its not a loan/bond. Lending money to somebody else, with a promise for future returns, is fundamentally a bond. It will act like a bond, subject to the economic principles of a bond / loans / etc. etc.
        dibt 4y ago
        > Lending money to somebody else It is not a loan! > promise for future returns There is no such promise! It is an alternative to proof-of-work, which requires capital investment to provide security to the network (e.g. purchase and run Bitcoin mining machines). Staking is a substitute for that capital requirement. You are refusing to understand this simple fact. If you loan a business money or buy a government bond, they are SPENDING that money to run the business/government. The Ethereum network is not selling your staked ETH to maintain security.
        dragontamer 4y ago
        > It is not a loan! So lets say I own 10 ETH. Explain to me how I get my staking rewards. Because step #1 involves me transferring that ETH to Coinbase (or some other entity with a large enough ETH basis to serve as a trusted staking entity). That is a loan. I don't own ETH anymore, I gave it to Coinbase. Coinbase creates an "IOU", saying "I promise that dragontamer will get his 10 ETH back", through some system of trust, contracts, databases and whatnot. It doesn't really matter what the details are, the whole thing is an IOU, a promise to return my ETH later. Similarly, when I deposit $10,000 into a bank (be it a savings account, or money market account), the Bank writes down an IOU saying it owes me $10,000. The bank then sends the money to the market (and worst-case, to the Fed Overnight loans), and lends the money out. Later, I withdraw the money, the bank undoes the process. -------- The only difference is that ETH doesn't allow you to withdraw the money as often as a savings account or money-market account/fund. So its kind of crappier than a normal savings/money market style loan that goes on. I guess ETH also gives a different level of rewards, seems to be 4.4% (though denominated in ETH rather than dollars).
- gruez 4y ago
  >Coinbase is also offering APY on its deposits through Coinbase Rewards, as does Binance. >This "true exchange" sounds like the no-true-Scotsman fallacy. Literally no one does what you claim. Everyone in the cryptocoin world is doing this "staking" == crappy loans / bonds business. If coinbase statements[1] and SEC filings[2] are to be believed, customer funds should be segregated and not used for loans. >We will never repurpose your funds: We do not lend or take any action with your assets, unless you specifically instruct us to. Many banks and financial institutions use customer funds for commercial purposes including lending and trading, meaning that they often hold only a fraction of their customer assets at any given time. Coinbase always holds customer assets 1:1. This means that funds are available to our customers 24 hours a day, 7 days a week, 365 days of the year. Presumably the coinbase rewards product is treated separately. ie. if you put your money there and whatever difi lending platform it's being invested in blows up, you'll lose your money that's in coinbase rewards, but everything else should be fine. [1] https://www.coinbase.com/blog/setting-the-record-straight-your-funds-are-safe-at-coinbase-and-always-will-be https://www.coinbase.com/blog/setting-the-record-straight-yo... [2] https://www.sec.gov/ix?doc=/Archives/edgar/data/1679788/000167978822000116/coin-20220930.htm#i26414a616d954719a495eab027dee0ab_16 https://www.sec.gov/ix?doc=/Archives/edgar/data/1679788/0001...
latchkey 4y ago
> A decentralized exchange won't give you free money, so less people will use it. UNI and SUSHI are prime examples of a DEX giving out free money.
- baobabKoodaa 4y ago
  How?
  - notch656a 4y ago
    $$$$$$$ Don't take your eye off the prize by asking silly questions like how.
gruez 4y ago
>A true exchange, where you just buy and sell, will never pause withdrawals because they won't be acting with these ponzi-like methods While operating a ponzi scheme in addition to an exchange certainly wouldn't help, even ponzi-less exchange is still susceptible, if they offer leverage. >You will have some customers who owe you money, and others whom you owe money. You will be like a bank. If everyone to whom you owe money demands their money back at once, you will need to get the money back from the ones who owe you money, which might be hard. (You might not have a contractual right to demand the money back right away, or it might be rude and bad for business, or you might have to liquidate them to get the money back and that would blow up the value of your collateral.) In broad strokes this is a reasonable description of what happened to Bear Stearns, a brokerage that financed its customers’ positions. If you are a crypto exchange that provides leverage, then you are probably bank-like enough for a run on the bank. https://www.bloomberg.com/opinion/articles/2022-11-08/binance-s-zhao-sbf-ed-ftx-s-bankman-fried https://www.bloomberg.com/opinion/articles/2022-11-08/binanc...

by shmatt 4y ago

dragontamer 4y ago

> A true exchange, where you just buy and sell, will never pause withdrawals because they won't be acting with these ponzi-like methods Coinbase is also offering APY on its deposits through Coinbase Rewards, as does Binance. This "true exchange" sounds like the no-true-Scotsman fallacy. Literally no one does what you claim. Everyone in the cryptocoin world is doing this "staking" == crappy loans / bonds business.

shmatt 4y ago
I mean, what are they doing to generate you that money, and how safe is it? FTX gave customer deposits to Alameda, without much knowledge I'd guess they wanted Alameda to generate that 8% APY, but customers weren't in the know "literally no one does what you claim", except in the FIAT world, which I see crypto enthusiasts claim FTX was under just as strict government oversight as a FIAT exchange/bank If your point is to say, even Coinbase are risking traders money, then yeah they are. If someone were to build "the TD ameritrade" of the crypto world, I guess they'd fail because they aren't giving away free money
dibt 4y ago
>Coinbase Rewards You are referring to staking. FTX was giving a static yield on deposits. The funding for this came from their marketing budget. Very different from what Coinbase does. >"staking" == crappy loans / bonds business. Staking is not a loan. It is a component of proof of stake networks to maintain security. Coinbase provides stacking services, but all they do is pass the yield onto the customer while taking a cut for the resources required for staking (e.g. AWS bill). Some token networks may market a mechanism as "staking" when it's just a way to keep people from selling. That's a different topic.
- dragontamer 4y ago
  > Staking is not a loan. Yes it is. You give your money over to another organization, and that organization promises a % yield / APY in return. You aren't allowed the money back until later. Its totally a bond. > Some token networks may market a mechanism as "staking" when it's just a way to keep people from selling. That's a different topic. I'm feeling some "no true Scotsman" fallacy here. If those guys call it staking, then its staking.
  - zoklet-enjoyer 4y ago
    Look up how consensus works on proof of stake blockchains. Specifically Tendermint chains, Ethereum, Tezos, Algorand.
    - dragontamer 4y ago
      Just because its a complicated loan/bond doesn't mean its not a loan/bond. Lending money to somebody else, with a promise for future returns, is fundamentally a bond. It will act like a bond, subject to the economic principles of a bond / loans / etc. etc.
      - dibt 4y ago
        > Lending money to somebody else It is not a loan! > promise for future returns There is no such promise! It is an alternative to proof-of-work, which requires capital investment to provide security to the network (e.g. purchase and run Bitcoin mining machines). Staking is a substitute for that capital requirement. You are refusing to understand this simple fact. If you loan a business money or buy a government bond, they are SPENDING that money to run the business/government. The Ethereum network is not selling your staked ETH to maintain security.
        dragontamer 4y ago
        > It is not a loan! So lets say I own 10 ETH. Explain to me how I get my staking rewards. Because step #1 involves me transferring that ETH to Coinbase (or some other entity with a large enough ETH basis to serve as a trusted staking entity). That is a loan. I don't own ETH anymore, I gave it to Coinbase. Coinbase creates an "IOU", saying "I promise that dragontamer will get his 10 ETH back", through some system of trust, contracts, databases and whatnot. It doesn't really matter what the details are, the whole thing is an IOU, a promise to return my ETH later. Similarly, when I deposit $10,000 into a bank (be it a savings account, or money market account), the Bank writes down an IOU saying it owes me $10,000. The bank then sends the money to the market (and worst-case, to the Fed Overnight loans), and lends the money out. Later, I withdraw the money, the bank undoes the process. -------- The only difference is that ETH doesn't allow you to withdraw the money as often as a savings account or money-market account/fund. So its kind of crappier than a normal savings/money market style loan that goes on. I guess ETH also gives a different level of rewards, seems to be 4.4% (though denominated in ETH rather than dollars).
gruez 4y ago
>Coinbase is also offering APY on its deposits through Coinbase Rewards, as does Binance. >This "true exchange" sounds like the no-true-Scotsman fallacy. Literally no one does what you claim. Everyone in the cryptocoin world is doing this "staking" == crappy loans / bonds business. If coinbase statements[1] and SEC filings[2] are to be believed, customer funds should be segregated and not used for loans. >We will never repurpose your funds: We do not lend or take any action with your assets, unless you specifically instruct us to. Many banks and financial institutions use customer funds for commercial purposes including lending and trading, meaning that they often hold only a fraction of their customer assets at any given time. Coinbase always holds customer assets 1:1. This means that funds are available to our customers 24 hours a day, 7 days a week, 365 days of the year. Presumably the coinbase rewards product is treated separately. ie. if you put your money there and whatever difi lending platform it's being invested in blows up, you'll lose your money that's in coinbase rewards, but everything else should be fine. [1] https://www.coinbase.com/blog/setting-the-record-straight-your-funds-are-safe-at-coinbase-and-always-will-be https://www.coinbase.com/blog/setting-the-record-straight-yo... [2] https://www.sec.gov/ix?doc=/Archives/edgar/data/1679788/000167978822000116/coin-20220930.htm#i26414a616d954719a495eab027dee0ab_16 https://www.sec.gov/ix?doc=/Archives/edgar/data/1679788/0001...

latchkey 4y ago

> A decentralized exchange won't give you free money, so less people will use it. UNI and SUSHI are prime examples of a DEX giving out free money.

baobabKoodaa 4y ago
How?
- notch656a 4y ago
  $$$$$$$ Don't take your eye off the prize by asking silly questions like how.

gruez 4y ago

>A true exchange, where you just buy and sell, will never pause withdrawals because they won't be acting with these ponzi-like methods While operating a ponzi scheme in addition to an exchange certainly wouldn't help, even ponzi-less exchange is still susceptible, if they offer leverage. >You will have some customers who owe you money, and others whom you owe money. You will be like a bank. If everyone to whom you owe money demands their money back at once, you will need to get the money back from the ones who owe you money, which might be hard. (You might not have a contractual right to demand the money back right away, or it might be rude and bad for business, or you might have to liquidate them to get the money back and that would blow up the value of your collateral.) In broad strokes this is a reasonable description of what happened to Bear Stearns, a brokerage that financed its customers’ positions. If you are a crypto exchange that provides leverage, then you are probably bank-like enough for a run on the bank. https://www.bloomberg.com/opinion/articles/2022-11-08/binance-s-zhao-sbf-ed-ftx-s-bankman-fried https://www.bloomberg.com/opinion/articles/2022-11-08/binanc...