# A Review of Short Term Interest Rates of Tokens in the Ethereum Defi Space, Why They Exi.. (Devcon5)

- Channel: [Devcon](https://streameth.org/devcon)
- Date: 2020-10-09
- Duration: 06:03
- Topics: blockchain, smart contracts, distributed ledger, ethereum
- Watch: https://streameth.org/watch/yt-UIqGfxZwGrQ
- YouTube: https://www.youtube.com/watch?v=UIqGfxZwGrQ

## Description

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https://archive.devcon.org/archive/watch/5/a-review-of-short-term-interest-rates-of-tokens-in-the-ethereum-defi-space-why-they-exist-and-how-to-interact-with-those-smart-contracts

This a review of the current interest rate economics in the Ethereum space. A quick look at loanscan.io will show tons of projects interacting with each other to create lending and borrowing opportunities. We are here to review why they exist and show on a practical level how to interact with these smart contracts. Most use cases will be earning a high-interest rate or getting a loan of a cryptocurrency.How do you make sure your money is safe, what risks are you taking, how is this different than lending/borrowing money in the "real" world? We will go through a practical example of taking USD and entering the crypto world, interacting with a smart contract and earning interest. The hope is to teach anyone to do this in 10 minutes.

Speaker(s): Akash Patel
Skill level: beginner
Track: Economics


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Devcon is the Ethereum conference for developers, researchers, thinkers, and makers. 
Devcon 5 was held in Osaka, Japan on Oct 8 - 11, 2019.
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## Transcript

[Applause] hi my name is Akash Patel Picard out so this is a review of short-term interest rates and then theorem defy space and I thought I would have a unique view because I see plumbing a little bit so I just kind of want you I wanted to give you guys my take it this is my opinion on it so again this is not financial advice again this is just a review of the interest rates and you know just what are those some of the potential risks this is a little bit of my biography that like sixty years of market making experience on the your side chains of Massage change okay so one of the big points that want to make is courtesies not a currency unless it hasn't yield so try to keep that in mind and then let's go through the history a little bit so you know make your CDs customer of January 2018 with a rate of 0.5% civilian fee by Ryuji to July 2018 dye supply increases to a lot of fifty billion the biggest use case for dye is you know people are basically using it for leverage so they lock up thirty eight they've been died they sell that dye and buy something else usually so that's another key point where they selling it to they're selling it to market maker so initially market makers were loaded up on duck and they're they're about five big market makers in the space so this is a quick chart to show you kind of the growth of dye supply over time you know start sub-zero coast about 80 million currently this one is to look at the the blue line is basically telling you the civilian fee interest rate right so most of the time is half a percent 2018 it it went to two and a half and then back to half a percent in 2018 2019 is where it gets a lot more interesting and and we'll get into the story block so again this is just a dye USD price from BitFenix this is to remind everyone kind of what the chart looked like for eath during this time period so 'if you know to us a big fall from 1200 all the way down to about 80 and then it's back up to kind of around 200 so again this is another truck just come again describing the youth type egg soon you know the orange lines the peg so it's kind of there's a better shot here okay so this is kind of one of the most important shards have where things got a lot more interesting so as you can see the orange line kind of around April you know we're hitting about 95 cents on the peg and this is kind of where it gets a lot more interesting because the market makers basically get overloaded with dye and again the purpose of a mark maker is to essentially you know provided quiddity but not really cold long-term positions so then the maker token holders their only option was to increase interest rates cause people to close off their CDs thus by diavik bring it back from a 95 cent price back to $1.00 so another good sharp is this charm from which a strawberry and this basically describes the dye pack and the different interest rate so long as we're going on so this kind of middle area is when it was around 1% defaults 95 cents they start increasing interest rates and finally you can kind of see the peg lifting and coming back to the dollar and and you know eventually they go to 70 and a half they reduce it then they go all the way to 20 okay so what are the things we learn there's a huge market for eight colors one of leverage long and probably true from two coins and they're willing to pay a high interest rate close to a ceiling of 15% for CPS but the normal flow of Dianna be with dyed admit to that sold mark makers and not a lot not oh not a lot of natural flow to my god because there's no initial yield so dice of light decreases the CDs close this created opportunities for doubt my compound and finally longtime owners had a yield and they get Dom ahead long-term contracts compound had variable interest rates so this is a quick chart but look the yield that you can get on the other platforms you know so dr. kadar then the main controllers basically degrees from 20 percent down to 10 but the cool thing is now we find out to weight flow which is their sellers attack for leverage the buyers have died for one hi Neal and these are quickly couple of the platforms you can easily use with two clicks of a button this is a big explosion of protocols and we have a bunch of places where you can earn up like high yield okay so final thoughts they get a person on currency unless it has healed and I believe kind of yield as a killer out it's gonna bring a billion users to here [Applause] you