In fact, these “poker chips” have grown from just a $20B valuation at the start of 2021, all the way to a market capitalization of $120B+ at the time of this writing
This growth was the result of their programmability and wide range of use
The ignorance shown here is astounding
So… what makes stablecoins so special?
To understand this we have to take a look at a problem that we see all too often in the financial market:
Lack of yield.
The average savings account in the United States is now paying 0.06% APY
At 5.3% CPI, you’re losing money by saving
On the other hand, we have areas of decentralized finance, offering users more than 10% APY on several pools for stable coins.
The yields can get even higher, with riskier routes.
Leading us to wonder, why is there such a discrepancy between tradfi and DeFi yield?
The simple answer comes down to matters of programmability, which I will explain a bit more…
These DeFi protocols aren’t simply printing free money, with unrealistic yields.
For example, Yearn’s $USDC vault offers a strong 7% APY.
How?
The vault has strategies approved by governance, with a flow that looks something like this:
->deposit $USDC
->supplies $USDC to Compound
->gets flashloan from $DYDX to boost APY
->earned $COMP gets harvested + sold for $USDC and invested back into vault
pretty cool, right?
Then there’s also other strategies which combine fundamentals of other DeFi applications to increase demand.
The Yearn $USDC vault lends tokens to Alpha Homora to generate yield, which is then borrowed by users to perform leveraged yield farming on their platform.
If we then wanted to go even further, we could then take a look at magic internet money.
The protocol allows these types of yield bearing interest tokens to be deposited as collateral to borrow a stablecoin called $MIM
What all of these share in common are a simple premise.
Decentralized lending for anyone with an internet connection. The effects of this across the world are going to be huge.
There is no credit score, no bank with insane interest rates, no bias, or boundaries in DeFi.
With all these things considered, there is one thing I’m sure of.
These “poker chips” sure sound a lot better than Gary Gensler’s advice of saving $5 a week in college at 8% APY to have $130,000 by the time you are 65 years old.
On November 9th, 2021 United States law enforcement officers closed in on a lakeside mansion in Georgia.
Inside of its floor safe they found $661,000 in cash, gold bars + coins, and a Cheetos popcorn tin.
The Cheetos popcorn tin contained $3.4B worth of bitcoin.
To understand how law enforcement found this unfathomable amount of money, & why $3.4B of bitcoin was stashed in a Cheetos tin, we’ll have to go back to 2009…
James Zhong had just turned 18 years old.
He was a smart, quirky kid with a knack for computer science.
After landing a near perfect score on the SAT, he packed his bags with everything he owned, traveled to the University of Georgia, & never spoke to his parents again.
This would mark the start of a new, extraordinary life for James.