How in the hell of it is it paying 5–6% interest. Where is this money coming from?
All of these defi projects offering staking and interest. No one has yet explained to me satisfactorily where this money is coming from.
Is it fees that people pay to transact on the network like Ethereum? And in that case won’t it cause exponential deflation as every action on the chain requires fees which will be put into larger and larger staking pools?
Is it minting? Which means you’ve basically invented the federal reserve again? The more you stake the more the whole shit inflates until the elbow of the exponential curve. Basically mathematically gaurenteed hyper inflation?
Or is all this interest coming from degenerates who are day trading crypto on a margin and what then happens when they all go bust at the same time when the shit crashes? All that “borrowed" money now is gone? What use is 8% a year when your going to lose 60% in the next 2 years?
In short I have no idea where all the crypto interest and staking is coming from. Everyone keeps talking about the returns and no one is talking about how these returns are being sustained.
In the real world these things are sustained by investing in businesses that then make goods and services to win over disproportionate market share which in turn generates profits which are used to pay the financiers their interest.