> I used to believe this -- "too good to be true", then I played with the tech and realized the folk borrowing the money at a higher rate (of course) were earning 2x that via various defi contracts.
Bernie Madoff's ponzi scheme survived for decades before it was revealed to be "too good to be true".
If those defi contracts collapse, your savings that got loaned out to them are gone. You're not getting that APR, and you're out the principal too.
That's not how it works. If the defi contracts collapse, the borrowers get margin called. The borrowers must overcollateralize quite a bit, usually 1.5x or 2x what they are borrowing. You could argue that the sell order will fall through in the case of a total market collapse. But the market has fallen 90% in the past and this has not happened.
Bernie Madoff's ponzi scheme survived for decades before it was revealed to be "too good to be true".
If those defi contracts collapse, your savings that got loaned out to them are gone. You're not getting that APR, and you're out the principal too.