The state of finance at this moment has never been better. We have lived through a financial crisis, wars, and a pandemic. The most significant economic era is the 21st century. Yet, even with that, banks give a nominal interest rate to their customers on their savings account and charge services fees for checking and investments accounts. I don’t know about you, but I ask myself the question all the time. How are the big banks getting richer and give us so little when they use our money?
Cryptocurrencies via stablecoins have cut the middlemen and bureaucracy, making a leaner process for finance via smart contracts, leading to fewer fees and higher interest rates. In some platforms like Aave, Compound, and other, you can get 3.80 to as high as 8.30% yearly rate, and in more centralized platforms such as Nexo, Celsius, and BlockFi, you can get as high as 12%. This will also depend on the stablecoin you choose; in some platforms that you use a coin, such as Terrausd and Trueusd (all US Dollar backed stablecoins), in some of their protocol, you can get as high as 20% yearly rate.
Now with high rewards, there is a level of risk. Some platforms are not well audited and can be subject to hacking. With his, there is no security that if your funds get stolen, you will get them back since some providers would not be insured like big banks are. Therefore you can get wiped out and have nowhere to go or complain. Not to say that this does not happen to big banks as well. Depending on the country that you are in, you may be better off putting your money anywhere that is not a bank “Cough Cough Venezuela, Argentina, Zimbabwe”.
There is also the risk that the stablecoin that you pick back by the US Dollar may be running into trouble with the United States authorities. This is the case with Tether, the oldest and most used stablecoin today. Recently, many accusations against Tether have been made by the Justice Department that goes from bank fraud to money laundering, among other things. This could be a drawback for using it, but there are better options such as USDC that are fully licensed can compliant, and has almost the same adoption as Tether. There is also Gemini Dollar and Paxusd that are fully regulated as well. However, these don’t have as much adoption, so you won’t get the rates and the advantages or have much access to things such as yield farming.
The best thing to do is research, and don’t put all your eggs in one basket. It’s always best to take everything with and a pinch of salt and be skeptical about it. If a new platform offers a ridiculous interest rate that is too good to be true, it probably is. If you are a new user, please check the article “Crypto Advice for Beginners in the Covid Era” If you are not, you know that banks are not the best option to put your money, and cryptocurrecy may be your best bet to get more wealth.
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