1. The money you put in is lent out to leveraged traders, collateralised with whatever they buy with it + a haircut. Prevailing rates are like 5-30% depending on time period and currency. You are taking credit risk
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My understanding (dumb, incomplete) is there are three sensible ways to make money in DeFi and then a bunch of “other stuff”. All the sensible ways are providing a service/compensation for risk.https://twitter.com/quantian1/status/1405173556317769733 …
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2. You deposit two or more tokens into a pool which is used to provide on-demand liquidity. You have adverse selection risk but you are compensated by the equivalent of spread/commissions
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3. You stake your tokens in blockchains which operate on proof of stake, so you are contributing to transaction processing and you earn the equivalent of mining fees.
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For all of these you can additionally earn governance tokens for participating, which confer voting rights (and sometimes other benefits) and could be valuable because of that. Usually the price of governance tokens is super volatile though.
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Most of the “other stuff” is variations on the above, usually by adding extra risk or extra leverage.
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Finally, and hopefully this is obvious so goes without saying, you can do all of the above but put it in THE TRANSMUTER.
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Someone who knows this please come and correct me
@TheStalwart@SBF_Alameda@AlamedaTrabucco@EvgenyGaevoy@0xElm0@roshunpatel@aaronlammer@tackettzane@dfauchierShow this thread
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@Ceazor7 makes really good charts explaining these strategiespic.twitter.com/h6Naou7i6f
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The videos make them easier understand
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