I have so many questions about DeFi I can’t find straight answers to:

I want to get into DeFi but every time I look into it, it just doesn’t seem… worth it? Idk

* Why would anyone lend on, say Aave, for 2-3% when they can get 19.5% on Anchor Protocol?
* I get that some people say that Anchor Protocol isn’t sustainable, but if it does decrease yield, you can just pull your money out at that time, no?
* On a related note, why would I use DeFi protocols and get 2-3% APY on stablecoins when I can get 8-9% on centralized lending platforms? Not to mention the insane gas fees (which I know are supposedly fixed by using L2s, but still)
* The only argument I keep seeing here is the benefit of decentralized vs centralized (no censoring, no terms and conditions, etc.), but is this really worth the difference between 2-3% and 8-9%? Especially if you’re just an average Joe?
* How would I decide between, for example, lending USDC and providing liquidity for USDC-USDT? They both seem to be passive ways to earn stablecoin yield.
* **Is there a way to view historical APYs for a protocol?** For the life of me, I can’t find this information and I feel like that’s the most important thing since it’s all variable

Any help would be greatly appreciated. I just feel so lost because the more I learn about DeFi, the less attractive it seems? What am I missing?

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16 thoughts on “I have so many questions about DeFi I can’t find straight answers to:”

  1. >Why would anyone lend on, say Aave, for 2-3% when they can get 19.5% on Anchor Protocol?

    On Aave, your deposit can be used as collateral to borrow. You can put down WBTC to borrow USDT whereas Anchor only has ETH and LUNA options.

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    >I get that some people say that Anchor Protocol isn’t sustainable, but if it does decrease yield, you can just pull your money out at that time, no?

    That should be the case. People worry that for some reason they won’t be able to withdraw their deposited UST because in a traditional bank run, there’s not enough money in the bank to let everyone withdraw. But Anchor doesn’t run on a fractional reserve system like traditional banks, so theoretically this shouldn’t be an issue for ANchor.

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    >On a related note, why would I use DeFi protocols and get 2-3% APY on stablecoins when I can get 8-9% on centralized lending platforms? Not to mention the insane gas fees (which I know are supposedly fixed by using L2s, but still)

    Given the two choices, the lower rates could make sense if your real reason might be to deposit in order to borrow something else. And some people do everything to stay anonymous.

    ​

    >The only argument I keep seeing here is the benefit of decentralized vs centralized (no censoring, no terms and conditions, etc.), but is this really worth the difference between 2-3% and 8-9%? Especially if you’re just an average Joe?

    For some people, yes, it’s very worth staying anonymous. For others, the real reason for lending is actually to use the deposit as collateral to borrow some other token. And as always, many people hate counterparty risk inherent in CeFi.

    But for a newcomer, using it’s most likely easier to just use a centralized exchange. The only suggestion for them would be to stick with a reputable one like BInance or [Crypto.com](https://Crypto.com).

    ​

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    >How would I decide between, for example, lending USDC and providing liquidity for USDC-USDT? They both seem to be passive ways to earn stablecoin yield.

    I’d say usually they’re almost identical. It’s only a matter of your appetite for risk. LPs vs lending carry different risks.

    Stable coin LPs tend to pay a higher APY in the form of the defi protocol’s own token. Some of them become absolutely worthless very quickly. The volatility of that token is a risk you’re taking. You could mitigate that by using an autocompounder but the point is that the nature of the risk is different from lending. Impermanent loss shouldn’t even be a worry.

    Lending is simpler, easier to understand. That alone makes it more favorable to newcomers.

    I’d just chase the higher APY, regardless of LP vs lending, as long as it’s a reputable defi protocol.

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  2. The true power of defi comes from being early to a platform, luring suckers in, and dumping native tokens on them. Its all about getting high APY paid in shitcoins and dumping it to HODLers in exchange for BTC, ETH, USDC, etc.

    People will try to sugercoat this mantra in various ways but just keep what I said in the back of your mind.

    Reply
  3. >Why would anyone lend on, say Aave, for 2-3% when they can get 19.5% on Anchor Protocol?

    There are lots of reasons to pick one project over another. With regards to Anchor – firstly it’s not that easy to get money on Terra. None of the major exchanges support it and you lose a lot of money in bridges. Secondly you may assess the risk of being hacked or rugged to be much higher on Anchor. Thirdly maybe you’ve never heard of Anchor Protocol since it’s nowhere near as famous as AAVE. Fourthly maybe you’re stuck on one chain or another for other reasons. A lot of other protocols put their funds on AAVE and they may not have the technical ability to flip their funds across different chains.

    > why would I use DeFi protocols and get 2-3% APY on stablecoins when I can get 8-9% on centralized lending platforms?

    I can’t answer for you personally but a lot of people can’t access centralized lending platforms due to KYC laws. Also CeFi platforms are harder to automate compared to DeFi platforms so if you’re borrowing and lending programmatically you may avoid them. However, the real answer is simple. If you can get better yield at lower risk elsewhere then do so.

    Another thing I would like to point out is that it may seem like AAVE is paying 2% on stable coins but because borrowing is cheaper than lending once you factor in rewards you can loop the same token many times and get a far greater percentage. For example on polygon AAVE the DAI APR is 2.37 but by looping I’m getting 12%.

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  4. *why would I use DeFi protocols and get 2-3% APY on stablecoins when I can get 8-9% on centralized lending platforms?*

    Majority of questions have already been answered but I would like to add to this question you have. One of the ways platforms such as Celcius make money is by using your crypto and doing defi themselves and returning your a cut of what they make. For example Celcius earn yield on BTC using BadgerDAO on ethereum. They earn more than they pay you and keep the difference as profit.

    I am most familiar with Solana and you can find returns on stablecoins on there for 20-30%.

    *Not to mention the insane gas fees (which I know are supposedly fixed by using L2s, but still)*

    Insane gas fees refers to using ethereum. So the solution is to not use the ethererum network.

    It is too expensive for most people. For example, if you wanted to stablecoin farm on another chain such as solana/avax/matic/luna/fantom etc, what you would do is buy that token, transfer it to that blockchain and THEN exchange it to a stablecoin. For example, it costs me 0.1 matic to transfer my matic from my exchange to the Polygon network.

    Reply
  5. Some great answers here and the reason I use centralized platforms like Youhodler or Nexo (around 12% for stable coins) is simply ease of use. I had a few scary experiences with own wallets and do not want that added stress for a few % more interest.

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  6. I suspect it has a lot of to do with trust.

    For example tropical.finance gives you 120% of stablecoin FlexUSD. And it pays. I know as I have money in it and it is great.

    However, it is new platform with low TVL. APR will come down, that’s for sure, but is it going to be rug pulled or hacked? Hard to say. So you risk a lot.

    Bigger platforms have better trust. Possibility of them going bankrupt or hacked is much lower so they can afford to offer you less as they will have a lot of customers regardless.

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  7. a saudi prince with millions (and millions more) don’t want KYC or AML. and the gas fees don’t matter with bags that big and they probably won’t touch USDT/C since those wallets can have that coin locked inside them forever.

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  8. I see that you have great knowledge about DeFi. Could you please give some advices which platform do you recommend for staking my stablecoins?

    So far i use:

    pancakeswap, Anchor, Yld App

    I See that you also recommend Aave. But what else? I would like to spend my stables across 5 or even more platforms. Diversity FIrst!

    Reply
  9. Take a glance at DefiLlama if you want to know which protocols are predominant in DeFI. Then you can look at thé investment opportunities on each protocols

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  10. Although DeFi as a whole is amazing, I won’t ignore the reality that it is still evolving and has its own set of issues. One of the major challenges in yielding has been the risk involved, and Spool is working to address that challenge by allowing users to create their own pools or use a third-party pool based on their individual risk appetite mainly for the purpose of minimizing risk and optimizing yield. Good initiative it is and we look forward to it

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  11. The full name of eFi is Decentralized Finance, that is, “decentralized finance”, also known as “open finance”. Currently, almost all DeFi projects are carried out on the Ethereum blockchain.

    Ethereum is a global open source platform for decentralized applications. On Ethereum, you can manage digital assets and run programs by writing code without geographical restrictions. The cryptocurrency it produces is called Ether (Ether, “ETH” for short)

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