Crypto.com earn 10% interest on tgbp

Frequentlyhere

 The amount of people on social media who genuinely appear to believe that they can earn 10% risk-free because "crypto" is incredible.

At least with the (mini) UK P2P bubble there was theoretically visible loans being made and assets to back the loans. This is just money going into the ether to inevitably be stolen one day.

@jimjames stablecoins, as the name implies, are theoretically meant to just stay at a par with the dollar. Their function is usually to facilitiate easier crypto trading because banks are (rightly) highly suspicious of crypto transactions and also the cost of switching back and forth is high. 

The problems are many. Stablecoins are effectively a wildcat bank, unregulated and subject to a run. Due to their lack of regulation there's no oversight to confirm that 1 stablecoin = 1 dollar.  The largest stablecoin, Tether, regularly prints off $1 billon worth of their currency, which is theoretically backed by investments, but we have to trust them on that.

As they reached a size where they exceed Vanguard for their theoretical safe investments (now about $70 billion i think?), it became apparent that nobody who deals with such investments has every heard of them. Leading to the revelation that their "investments" are held elsewhere, reputedly in Chinese real estate. Apparently.

I think that one is run by a former cosmetic surgeon and someone else, both of them never ever do media and it's difficult to even find a picture of them. People who run a multi billion dollar financial firm who are camera shy it seems. I can't imagine why.

There's so much more, but good god, what a World we live in now.

Aegis

Adyinvestment said:

It really isn't that hard to understand, very similar to a bank except they give fairer rates.

Checking their site for someone with bottom account level status you get 6% interest on most stable coins, to borrow the same amount will cost you 12% interest (the levels change on terms)

So they lend money out at a higher rate of interest than they give on deposits...not exactly rocket science and certainly not a Ponzi scheme.

This is the reason I believe decentralised finance is the biggest threat to the banks and not crypto in general, and also why stable coins will probably eventually be heavily regulated (possibly a good thing)

Except that a bank would be covered by the FCSA and the government would almost certainly step in should the bank go bust as they have done in the past.  Northern Rock, Icesave,  Kaupthing Edge, etc. The comparison here should be with peer to peer lending, which offers much higher rates than savings but is well understood to be unregulated and much more dangerous than cash.

Looking at the exact figures,  paying 6% interest and charging 12% means the lender would have to lend out half as much as it took in deposits just to break even.  If a large number of depositors withdraws money at once, then the lender would not be able to pay this level of interest and would need to either cancel the interest, default on their liabilities or go bust altogether. Well, or give up the ghost and become a true ponzi scheme.

Doing this in a currency designed to obfuscate the exact ownership just makes me more suspicious.

Adyinvestment

Frequentlyhere said:

@jimjames stablecoins, as the name implies, are theoretically meant to just stay at a par with the dollar. Their function is usually to facilitiate easier crypto trading because banks are (rightly) highly suspicious of crypto transactions and also the cost of switching back and forth is high. 

The problems are many. Stablecoins are effectively a wildcat bank, unregulated and subject to a run. Due to their lack of regulation there's no oversight to confirm that 1 stablecoin = 1 dollar.  The largest stablecoin, Tether, regularly prints off $1 billon worth of their currency, which is theoretically backed by investments, but we have to trust them on that.

As they reached a size where they exceed Vanguard for their theoretical safe investments (now about $70 billion i think?), it became apparent that nobody who deals with such investments has every heard of them. Leading to the revelation that their "investments" are held elsewhere, reputedly in Chinese real estate. Apparently.

I think that one is run by a former cosmetic surgeon and someone else, both of them never ever do media and it's difficult to even find a picture of them. People who run a multi billion dollar financial firm who are camera shy it seems. I can't imagine why.

There's so much more, but good god, what a World we live in now.

Just to say that I don't really trust stable coins either (especially Tether), I was trying to explain how Crypto.com (who I believe are a proper company) make the yields possible.

However I do think in the coming years there will be regulated stable coins.

adam06_2

I'm not sure where people are getting the Idea that I think this is "risk free".. not many things in life are. I mentioned in my original post that I'm fully aware that I'm not fscs protected.. and that I have put in a small amount that I'm comfortable with.. not my life savings, and I will continue to put a bit in each month like a savings account. Once I get a decent amount, I might look for another exchange and split the money to reduce risk of a single exchange going bust. No risk, no reward.
As I'm using stable coins I'm less at risk of the large market fluctuations in other cryptos.

Adyinvestment

Aegis said:

Except that a bank would be covered by the FCSA and the government would almost certainly step in should the bank go bust as they have done in the past.  Northern Rock, Icesave,  Kaupthing Edge, etc. The comparison here should be with peer to peer lending, which offers much higher rates than savings but is well understood to be unregulated and much more dangerous than cash.

Looking at the exact figures,  paying 6% interest and charging 12% means the lender would have to lend out half as much as it took in deposits just to break even.  If a large number of depositors withdraws money at once, then the lender would not be able to pay this level of interest and would need to either cancel the interest, default on their liabilities or go bust altogether. Well, or give up the ghost and become a true ponzi scheme.

Doing this in a currency designed to obfuscate the exact ownership just makes me more suspicious.

I agree that there is a lot of work to be done before decentralised finance becomes "trusted" - I have concerns also.

Aegis

adam06_2 said:

I'm not sure where people are getting the Idea that I think this is "risk free".. not many things in life are. I mentioned in my original post that I'm fully aware that I'm not fscs protected.. and that I have put in a small amount that I'm comfortable with.. not my life savings, and I will continue to put a bit in each month like a savings account. Once I get a decent amount, I might look for another exchange and split the money to reduce risk of a single exchange going bust. No risk, no reward.
As I'm using stable coins I'm less at risk of the large market fluctuations in other cryptos.

It may be another method that's been discussed lately where the claim that it's possible to get 10% risk free from crypto investments.  Clearly an absurd claim, as that's a higher rate than the majority of peer to peer lenders offer.  Perhaps it wasn't explicitly stated here, but the issue is that people see 10% interest and assume it's cash, which is usually risk-free.

Aegis

Adyinvestment said:

Aegis said:

Except that a bank would be covered by the FCSA and the government would almost certainly step in should the bank go bust as they have done in the past.  Northern Rock, Icesave,  Kaupthing Edge, etc. The comparison here should be with peer to peer lending, which offers much higher rates than savings but is well understood to be unregulated and much more dangerous than cash.

Looking at the exact figures,  paying 6% interest and charging 12% means the lender would have to lend out half as much as it took in deposits just to break even.  If a large number of depositors withdraws money at once, then the lender would not be able to pay this level of interest and would need to either cancel the interest, default on their liabilities or go bust altogether. Well, or give up the ghost and become a true ponzi scheme.

Doing this in a currency designed to obfuscate the exact ownership just makes me more suspicious.

I agree that there is a lot of work to be done before decentralised finance becomes "trusted" - I have concerns also.

No argument here, and by the time it becomes trusted there will likely be a few stable coins which are used, with the rest falling by the wayside.  I don't think I could predict which will do well and which won't.

Gary1984

Who's actually borrowing stablecoins at rates of 12%. Nobody I expect, but it's just being advertised to make the 6% interest sound plausible as if there's a business plan behind it. Also, who's going to make you pay it back? Can crypto debts be enforced? 

Is there any sort of credit risk assessment done before you get your loan? Anyone who's a reasonable risk could get a legit loan for less than 12% Which again makes me think it's just an advertised rate nobody is expected to take in order to make the 6% seem reasonable.

Also someone implied the 6% rate was fair and banks are ripping us off with 0.5% interest. But mortgage rates are around 1-2%. You can see why savings rates are where they are. If they offered savings at 6% and mortgages at 2% they'd go bust very quickly.

Aegis

Gary1984 said:

Who's actually borrowing stablecoins at rates of 12%. Nobody I expect,

I expect you're right.  Even if they lent out GBP at 12%, there are still a lot more lenders to go to that undercut that rate, so presumably the default rate is pretty high for unsecured lending at this level.  It wouldn't surprise me to hear that after defaults and profit for the exchange, there would need to be almost as many depositors as borrowers, which again doesn't seem likely.

Malthusian

Gary1984 said:

Who's actually borrowing stablecoins at rates of 12%. Nobody I expect, but it's just being advertised to make the 6% interest sound plausible as if there's a business plan behind it. Also, who's going to make you pay it back? Can crypto debts be enforced?

A crypto debt can be enforced in the courts same as any other, subject to jurisdiction, the same as if you borrowed somebody's else's GBP, gold or sheep, but as the point of crypto is to be a sovereign citizen and above the courts, that would be rather missing the point.

Practically speaking it's never going to be enforced as the money will be gone.

Is there any sort of credit risk assessment done before you get your loan? Anyone who's a reasonable risk could get a legit loan for less than 12% Which again makes me think it's just an advertised rate nobody is expected to take in order to make the 6% seem reasonable.

So I could queue up in the bank, spend hours filling in forms, supply all my bank statements, answer lots of tedious questions about how much I'm spending on Fortnite hats, and then eventually I might get a loan.

Or I can press a button and some bro's stablecoins will just fly into my wallet. Which do you think sounds like the best option?

As for the higher interest rate, that's neither here nor there when I'ma get rich quick by buying other cryptocurrencies or trading them with a magic algorithm (all anyone does with borrowed crypto). Who cares if I have to pay back peanuts or a slightly larger bag of peanuts when I'm sitting on a 40-foot gold catamaran?

Also someone implied the 6% rate was fair and banks are ripping us off with 0.5% interest. But mortgage rates are around 1-2%. You can see why savings rates are where they are. If they offered savings at 6% and mortgages at 2% they'd go bust very quickly.

Not if they reinvested the mortgage interest in this new magic cryptocurrency that will help dirt farmers in Venezuela buy Teslas.