I have a vested interest in this domain now that I'm starting up in this space so am closely following these and related products.
A whole bunch of these startups have sprung up; which take up real money (USDT or even USD, INR etc.,) promising very attractive guaranteed returns without locking up customers' fund. Look at these[1] for examples. Anyone who knows anything about banking in the traditional world knows how ridiculous it is. And indeed some of these are beginning to unravel[2]. In Anchor's case there are way more lenders than borrowers so Anchor is resorting to pay those high yields from their reserves. It's cutting close to being a Ponzi scheme at the moment.
In a traditional banking world businesses take a loan either to cover for a short-term cashflow crunch (example an invoice that's delayed by their client) or for longer term investment. That money usually goes into economic activities which are expected (hoped?) to bear fruit to repay the loan.
In the crypto world however such loans are taken only to be put back into the crypto world; to be swapped into some hot new coin to be staked and what not. The music has got to stop at some point.
I'm really glad SEC has been proactive. I hope regulators in other countries do so. Because 99% of the money flowing into these are totally guidable and clueless people; they need to be protected for their own sake.
I have a vested interest in this domain now that I'm starting up in this space ... 99% of the money flowing into these are totally guidable and clueless people
Is your startup going after the consumers? If most prospective customers are clueless, and many of the remaining customers are sharks or early investors looking for suckers, that doesn't bode well for new companies in this space, even the ones that are trying to do things right.
You are right in general. As you could guess from the tone of my comment, I want the ecosystem to be cleaned up and my startup is going to play a role in that. It is essential for crypto/DeFi to go mainstream. There is a big shakeup coming which will weed out all these get-rich-quick products.
Me and my co-founders are committing ourselves into this for the long haul (think ~10 years) so are taking it slow. We hope our deliberate, slow and steady approach will help us tide over the current short term bubble and the imminent burst.
Are you able to speak to how your startup plays a role in cleaning up the ecosystem? It seems like there are a bunch of different types of things that need cleanup, everything from the likes of BlockFi and lending products to outright scams that are trying to steal your wallet credentials or steal your funds. I'd welcome any type of cleanup
We are at idea-validation stage so it's very early days for us. The overarching theme is educating users by making them aware of what they are/have getting/gotten into. Somewhat similar to rating agency in the traditional finance world (e.g., Moody's) but not exactly like them.
One related thing is that there has been a large increase in attempts by scammers to mimic a legitimate product with a fake domain, etc. You could actually detect these pretty well by looking at the TVL and other factors. Was the contract deployed fewer than 30 days ago? Have the amount of funds deposited to it less than the top 50/100 contracts?
A related problem is not even depositing but simply granting token approval to a scam app, and similar techniques may be used to warn users before they give these approvals.
If you told me "I'm like a rating agency" I'd double my scrutiny of you, if I didn't simply walk away.
The agencies played a large role enabling the mortgage bubble that popped in 2008. They were essentially selling ratings to bond issuers without any real attention to the quality of the loans underlying the bonds.
A whole bunch of these startups have sprung up; which take up real money (USDT or even USD, INR etc.,) promising very attractive guaranteed returns without locking up customers' fund. Look at these[1] for examples. Anyone who knows anything about banking in the traditional world knows how ridiculous it is. And indeed some of these are beginning to unravel[2]. In Anchor's case there are way more lenders than borrowers so Anchor is resorting to pay those high yields from their reserves. It's cutting close to being a Ponzi scheme at the moment.
In a traditional banking world businesses take a loan either to cover for a short-term cashflow crunch (example an invoice that's delayed by their client) or for longer term investment. That money usually goes into economic activities which are expected (hoped?) to bear fruit to repay the loan.
In the crypto world however such loans are taken only to be put back into the crypto world; to be swapped into some hot new coin to be staked and what not. The music has got to stop at some point.
I'm really glad SEC has been proactive. I hope regulators in other countries do so. Because 99% of the money flowing into these are totally guidable and clueless people; they need to be protected for their own sake.
[1] https://www.pillow.fund [1] https://www.flint.money
[2] https://au.finance.yahoo.com/news/anchor-protocol-reserves-s...