Traditional finance yields are bullcrap, but how do they actually compare to what you get in DeFi?

Recently read this post from onomy that does a thorough analysis on the main differences between bank yield and defi yields.

Realized i never thought about the source of the yield when there’s no lending involved – moreover, i never thought that banks can’t physically reach defi level yields (not because of their avarice, but because the way the infrastructure was built).

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11 thoughts on “Traditional finance yields are bullcrap, but how do they actually compare to what you get in DeFi?”

  1. We all know bank interest on checking/savings is shit and not keeping up (at all) with inflation, so storing money in the bank is a net expense.

    DeFi yields are great, and as the article touches on some of the sources of that yield:

    * Interest from collateralized lending
    * Interest from LP/DEX trading fees
    * Interest from inflationary tokens where value is tied to tokenomics and/or speculation.

    Generally the first two are at might higher rates due to the lack of physical infrastructure to make a bank work: buildings, pens, vaults, security, ATMs, armored vehicles and people etc. etc. Needless to say that stuff is insanely expensive. When all is said and done the bank is taking profit.

    So should you just park your “emergency fund” in defi? Well here is where the ever-present Risk/Reward tradeoff comes in. Banks will offer some security in that you can revert any fraudulent transaction. They’ll keep bad guys out of your account and the bank shouldn’t suddenly collapse and steal your money *(In most developed nations).*

    On the flip side, with DeFi you have

    * Rug pulls
    * Protocol failure/hacks
    * Government regulation
    * Getting screwed on tokenomics: e.g. you earn interest in an inflationary token that craters before you converted and took a profit.

    So I consider DeFi higher risk/higher reward than TradFi. Within DeFi there is a whole range of risk profiles and on one end I don’t think they are all that risky (e.g. stablecoin pools). I recommend you play it safe in that space. Don’t be greedy. Go with a trusted protocol and transparent tokenomics for a modest APY. Don’t put more than you’re willing to lose on the line.

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  2. Don’t even compare them man, that’s exactly why banks are starting to invest in DeFi assets too. Take EQIbank for example. It partnered up with a project called UnidoEP and supposedly, its a platform specifically made for their specific infrastructure. Investing as an individual party is one thing but investing as an institution is another. Astronomical gains could be seen on both sides

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  3. That’s why im super bullish on DeFi, we’re still super early in the topic..the tech is here but supreme is yet to come. Pretty bullish on Kadena from a blockchain perspective and DeFi future it holds, 480k tps and scaling like no other its bound for liftof..their ecosystem is just started to expand, super bullish on Kaddex , the first ever gas free dEx built on it ..i think one just has to research and dwell deep to find the new trends and good profits

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