Using an AMM to lend and borrow

Looking for someone smarter than me (not that hard to find) to give some clarification:

There is an AMM currently providing 9.5% APY (in an established alt) and 6.3% in the native governance token if I lend the alt

It costs 18.95% to borrow the alt but I get 10.69% in the governance token as rewards for borrowing.

So, technically, I could borrow the alt and immediately lend it out. This would result in a 9.5% loan which I would have to repay on the alt but 17% pure rewards in the token.

Why the hell wouldn’t everyone do this?? You’re net profit 7.5% for doing nothing except moving assets around. What am I missing here??

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1 thought on “Using an AMM to lend and borrow”

  1. A lot of people do this, some take it a step further by looping it: borrow, deposit as collateral, borrow again and repeat up to their risk level. A lot of protocols issue governance tokens out of thin air as rewards


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