Why Defi is smoking

Bond hits 4% while Defi hits 0.01%! So why is Defi not working anymore?

To attract more funds to invest into the pool, either bonds or Defi, you need to find other investments that can lend more returns than you pay to investors.

Defi used to be successful because the crypto market seemed to rise unlimited to the moon.

However, when the market falls, the yield cannot cancel out the payoff to investors, making the pool return negative and forcing lending unprofitable.

Even the crypto market has unregulated arbitration to make the difference, and they can no longer produce a profitable strategy and make double-digit yields.

https://twitter.com/dan_pantera/status/1546871339331604482

Why did Defi fail?

Defi's concept is innovative because it offers an opportunity for less disadvantaged business owners to borrow and make the business continue operating.

The problem is when Defi is an investment instrument for only making profits in the short term.

There is no mechanism to prohibit withdrawing and to make the pool sustainable for long-term investment.

And the hype of attracting more investors with crazy and unsound yield percentages makes the Defi project lose its credibility.

I do think Defi is a potential future fintech, but it is not a kind of easy money pump and dump scheme.

I continue being skeptical about the Defi.

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Photo by Pascal Meier

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