The WSJ came out with a great report on crypto “yield farming”. As the article makes clear: there are a substantial risks. In a world of inflation, negative yields & savings accounts with no yield, the solution is innovation. From the Journal: “Instead of putting their money in a bank, yield farmers typically hand their cryptocurrencies to computer programs. Some of these programs lend coins to borrowers and collect interest for the yield farmers. For example, if an investor wanted to earn interest on tether, a so-called stablecoin that seeks to maintain the same value as the U.S. dollar, she could link her digital wallet to Aave, a crypto-lending platform. Aave would lend out the investor’s tether funds and pay the interest directly into her digital wallet. As of late Friday, Aave was offering an annualized yield of around 2.9% on tether. Such yields can fluctuate minute-to-minute based on lending and borrowing activity. Aave is among the bigger players in decentralized finance, or DeFi, the fast-growing segment of the crypto market in which yield farmers generally look for returns.”
The central bank-Wall Street axis is breaking. Defi is here to stay and the legacy players will soon all have their own sponsored DAOs or they will be out of business.