What’s with all these Ponzi type APR on Stablecoins?

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Quote from: adaseb on May 25, 2024, 11:45:02 PM

So I know there are a few places where you can be a LP and gain about 4% APR for your stablecoins like USDC and USDT.

You can also just keep it in your US savings account or buy bonds and get 5-6%. This I understand.

But I keep seeing these protocols like Mute.io which is KOI now and Zk Finance and they claim they pay 20% for staking your stable coins.

You need to add it to the pool and then add it to some farm. And you get 20%. My question is where is this 20% coming from?

On many LP you only get 3-4%. And they are paying 20%. I would understand if this was some memecoin which gave 20% APR because those are at risk of going -90% but for a stable coin, paying 20% almost sounds Ponzi like.

What is going on here ?

It's basically related to that trading fees that they charge while you transfer from one chain to another the amount of fees they deduct is a factor that depends on APR.
The projects are often seen on the basis of the percentage of ApR and that is an important tools for the investors and trading experts as if it's calculated then it makes things easier for us to choose whether the project is worthier to invest or not.

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Quote from: cryptoaddictchie on May 27, 2024, 01:56:35 PM

Quote from: mk4 on May 27, 2024, 11:07:53 AM

Just make sure you know what you're doing; because chances are, you might be actually losing money due to impermanent loss. I personally, along with like a crap ton of people farmed in the past due to the attractive APRs but didn't know about impermanent loss which ended up wrecking us regardless of the direction the coins went.

Of course I do. Yes and I control the profits during every week, like I said I trust the project I am farming and already got like 60% of my funds taken out from my capital and still let me earn at continous rate. How did this happened? Since the price of the token changing I sold some during high peak and now doing a weekly cash out until I earned back fully my capital after that if the project still good then its a passive incomr already without much doing anything but to click claim as you wish.

Great but it looks like a basic strategy for me, however I believe that a lot of people are still a failure when it comes to following it only because they got greedy. I think it's also possible to automized everywhere there and you don't need to click on that claim button anymore but maybe there are some catch like you need to pay extra to use that service. This is still great for those who are busy and are earning good already.

It's only sad that schemes like this can still be considered as Ponzi, just like the title says and most of the times they don't last long. So, this shouldn't be our priority if our goal is to earn some profits. There's still other legit earning opportunities out there anyway.

bittraffic

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Seems too good to be true but I would be glad to participate as LP if the stablecoins stay in our wallet and not be sent to the platform. I think there are platforms like this but I have no idea bout this Mute.

I always have paranoia about those platforms which they could just stop operating abruptly and then all LP's tokens are gone. No one will ever get to file a case or even i there are, it will end just like SBF.

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Quote from: adaseb on May 26, 2024, 11:15:50 PM

Yes you guys are right. The APR rewards is not in the stablecoin but it’s paid in the native token. So for ZK finance you are paid in ZF. Looking at the chart of ZF it’s declining but not that much.

So I guess it makes sense. They pay these huge APR but issue it in their native Token and hope most people don’t sell the token and use it instead.

Ok makes sense. I assumed it was some scam going around.

Thanks for the replies.

Basically they are printing their tokens and giving it as rewards for people who stake coins and as long as their token has value it seems legit but what if everyone who got the reward decided to cash out instead of keep it as the coin which means the coin is going to dump then those 20% might not even reaches 4-5% effective rate that we usually get in other staking platforms.

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The main "idea" is that people trade there, and since there aren't many USD stablecoins that is trusted on those platforms, the trading is done via the few that support the LP, and that is why it looks higher.

However, there is a reason why they do not believe those places and do not put their money in, there has been a lot of hackings at DEX as well, which emptied the wallets, which is why people do not trust new places or basically places that they do not know. Places that are trusted and liked usually have lower, because people trust those places and put their money in, making it shared among everyone and drop the rate. So, if you want to take a risk, you go with higher one, but most of the people do not trust those places and that's why it is high.

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Quote from: adaseb on May 25, 2024, 11:45:02 PM

So I know there are a few places where you can be a LP and gain about 4% APR for your stablecoins like USDC and USDT.

You can also just keep it in your US savings account or buy bonds and get 5-6%. This I understand.

But I keep seeing these protocols like Mute.io which is KOI now and Zk Finance and they claim they pay 20% for staking your stable coins.

You need to add it to the pool and then add it to some farm. And you get 20%. My question is where is this 20% coming from?

On many LP you only get 3-4%. And they are paying 20%. I would understand if this was some memecoin which gave 20% APR because those are at risk of going -90% but for a stable coin, paying 20% almost sounds Ponzi like.

What is going on here ?

I've too tried some platforms and it does work. There even was one that gave 50% but the catch watch it took 3 months to release the funds making the effective APR somewhere near 30%. Which is still high. There are a plenty that provides around 20%.
They have stablecoin to stablecoin liquidity pair farming on defis which yields more as people exchange from one stable coin to other. Specially the yield aggregator defi would curate the best interest with best strategy without your involvement and it does work. The balance are in USD value and you can withdraw them anytime paying the exchange and transaction fees. I plan to have at least 25% of my trading profits in USD value by the end of this year and I'm looking for defis.

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Quote from: adaseb on May 25, 2024, 11:45:02 PM

So I know there are a few places where you can be a LP and gain about 4% APR for your stablecoins like USDC and USDT.

You can also just keep it in your US savings account or buy bonds and get 5-6%. This I understand.

Companies behind stable coins like USDT, USDC use their money, customer money to buy governmental bonds too.

Quote

But I keep seeing these protocols like Mute.io which is KOI now and Zk Finance and they claim they pay 20% for staking your stable coins.

You need to add it to the pool and then add it to some farm. And you get 20%. My question is where is this 20% coming from?

It is risky and it is common with many DeFi platforms and their native currencies when their projects start. Their tokenomics usually are very bad designed, high inflationary and their native currency/ token will lose value with time.

20% APY is a very high figure that contains risk if we take into consideration warnings that APY above 12% is a red flag already and here, it's 20%, not 12%.

Terra crash in 2022 is an example for death spiral from high APY.

The Terra Luna Crash is a Warning for Investors to Keep their Eyes Open

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Quote from: mk4 on May 27, 2024, 11:07:53 AM

Just make sure you know what you're doing; because chances are, you might be actually losing money due to impermanent loss. I personally, along with like a crap ton of people farmed in the past due to the attractive APRs but didn't know about impermanent loss which ended up wrecking us regardless of the direction the coins went.

Of course I do. Yes and I control the profits during every week, like I said I trust the project I am farming and already got like 60% of my funds taken out from my capital and still let me earn at continous rate. How did this happened? Since the price of the token changing I sold some during high peak and now doing a weekly cash out until I earned back fully my capital after that if the project still good then its a passive incomr already without much doing anything but to click claim as you wish.

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Quote from: cryptoaddictchie on May 27, 2024, 06:17:30 AM

Yes mate in doing farming the risk is on the token price. I have currently a farm on injective with %180 to %220 APR, using two tokens ( none stablecoin) cause I choose the high APR and its really giving me some good harvest weekly in token rewards. I converted that harvested tokens into stable weekly so I can feel the rewards.

I dont like the safe usdt stablecoin farming with my alloted stable I wont earn much mught as well risk on a good APR farming.

Just make sure you know what you're doing; because chances are, you might be actually losing money due to impermanent loss. I personally, along with like a crap ton of people farmed in the past due to the attractive APRs but didn't know about impermanent loss which ended up wrecking us regardless of the direction the coins' prices went.

GreatArkansas

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Very well said by FinneysTrueVision.

Just addition to it, just monitor this APR, because sometimes it's not real-time or sometimes it fluctuates.

Look at this example chart on Aave - Arbitrum Network, USDC.e supply.
This is 1 month chart and you can't really see it is really stable, but the average APR of it is 6.83%, not just stable.

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Quote from: adaseb on May 26, 2024, 11:15:50 PM

Yes you guys are right. The APR rewards is not in the stablecoin but it’s paid in the native token. So for ZK finance you are paid in ZF. Looking at the chart of ZF it’s declining but not that much.

So I guess it makes sense. They pay these huge APR but issue it in their native Token and hope most people don’t sell the token and use it instead.

Ok makes sense. I assumed it was some scam going around.

Thanks for the replies.

That's right.

While the depositors are using stable coins that are liquid, I guess these deposits that these platforms they are in have fixed period and not flexible terms.

It's the same as lending them but they're going to pay the depositors money out of thin air which is the token that they produce.

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Quote from: adaseb on May 26, 2024, 11:15:50 PM

Yes you guys are right. The APR rewards is not in the stablecoin but it’s paid in the native token. So for ZK finance you are paid in ZF. Looking at the chart of ZF it’s declining but not that much.

So I guess it makes sense. They pay these huge APR but issue it in their native Token and hope most people don’t sell the token and use it instead.

Ok makes sense. I assumed it was some scam going around.

Thanks for the replies.

Yes mate in doing farming the risk is on the token price. I have currently a farm on injective with %180 to %220 APR, using two tokens ( none stablecoin) cause I choose the high APR and its really giving me some good harvest weekly in token rewards. I converted that harvested tokens into stable weekly so I can feel the rewards.

I dont like the safe usdt stablecoin farming with my alloted stable I wont earn much mught as well risk on a good APR farming.

adaseb

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Yes you guys are right. The APR rewards is not in the stablecoin but it’s paid in the native token. So for ZK finance you are paid in ZF. Looking at the chart of ZF it’s declining but not that much.

So I guess it makes sense. They pay these huge APR but issue it in their native Token and hope most people don’t sell the token and use it instead.

Ok makes sense. I assumed it was some scam going around.

Thanks for the replies.

cryptoaddictchie

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Quote from: adaseb on May 25, 2024, 11:45:02 PM

You need to add it to the pool and then add it to some farm. And you get 20%. My question is where is this 20% coming from?

On many LP you only get 3-4%. And they are paying 20%. I would understand if this was some memecoin which gave 20% APR because those are at risk of going -90% but for a stable coin, paying 20% almost sounds Ponzi like.

What is going on here ?

From trading fees and also I assumed that even its gets their budget for payment these insane APR from their treasury for minting coins of their own which is then rebalance on their stable pool. For sure koi platform got tokens already and their utilizing it. The only consequence of this is a big drop on their token value provided that it doesnt have much use case. But in the case of KOI which is served and used on Zk ecosystem new feature paymaster that uses KOI instead of eth as gas fee they are confident that many users will maximize that feature. Maybe thats why they are confident of issuing a higher rate of APR% hope it helps.

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The APR usually comes from trading fees and also the DEX that is trying to attract liquidity will incentivize users by offering their native token as a reward for staking in certain pools. Trading fees are usually not that high, unless the price is really volatile you will see a higher APR for a few days but it is misleading because you won’t earn that percentage in a year, you will only earn it if volatility, demand, and liquidity remain exactly the same.

As for token rewards, the exchanges are basically printing their own money. When they first launch their token, emissions will be high to make their APR look attractive, but this has the side effect of causing hyperinflation so the token’s value will go down and the APR will go down along with it. To combat this, the developers will come up with different mechanisms to make their token deflationary and pump the price back up.

The printing their own money aspect does look like a scam, but to be fair, some newer DEXs have tried to create governance models which give their token lasting value rather than being just a get rich quick shitcoin.

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So I know there are a few places where you can be a LP and gain about 4% APR for your stablecoins like USDC and USDT.

You can also just keep it in your US savings account or buy bonds and get 5-6%. This I understand.

But I keep seeing these protocols like Mute.io which is KOI now and Zk Finance and they claim they pay 20% for staking your stable coins.

You need to add it to the pool and then add it to some farm. And you get 20%. My question is where is this 20% coming from?

On many LP you only get 3-4%. And they are paying 20%. I would understand if this was some memecoin which gave 20% APR because those are at risk of going -90% but for a stable coin, paying 20% almost sounds Ponzi like.

What is going on here ?

Topic: What’s with all these Ponzi type APR on Stablecoins? (Read 141 times)