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People often think crypto == bitcoin. I think there are 4 categories that people should think about: 1. Crypto as asset class (BTC/ ETH) 2. Crypto for transactions - usually pegged to a dollar or other fiat eg. USDC 3. Crypto as a utility/ asset backed token - filecoin etc 4. fraud.

I think mastercard visa etc will focus on #2 above and it will bring extremely powerful dynamic to these ecosystems



#2 (crypto transactions backed by traditional currency) is far and away the most useful of these categories.

Unfortunately, it doesn't offer the speculative upside of something like Bitcoin. People don't actually care if their transactions are carried across a blockchain or a database, as long as it gets done.

Bitcoin is hot specifically because it's so detached from any real-world use cases or metrics that might put bounds on its price. There's a narrative that because no one can determine an upper limit for Bitcoin price, there's infinite upside. Of course that narrative is no different than any other arbitrary asset, but the Bitcoin narrative is strong because it's been in the news so much.


Pegged tokens like USDC and USDC can still be used to speculate in DeFi platform like AAVE with pretty lucrative returns.


Where do the returns come from?

Does the interest return come from actual investments? Or is it paid forward by newcomers? The latter is the literal definition of a ponzi scheme.

There's no free lunch when it comes to generating interest.


It is as the other commenter said, returns come from other people borrowing collateral and paying interest on it.

It may also interest you to know that AAVE was granted an Electronic Money Institution license by the U.K. Financial Conduct Authority (https://register.fca.org.uk/s/firm?id=0010X00004U9vVAQAZ).


Borrowers pay more than lenders. You get a cut of those fees as interest. There's risk there of course, but it isn't magic money or a ponzi.


So the borrowing costs must be quite high to warrant that revenue.


Currently 18% borrow APY with 143M USDC being borrowed. You can check it here https://app.aave.com/markets




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