[xur17]

> I see a lot of crypto enthusiasts speak highly about NFTs which I find odd. They generally have very well thought out and reasoned arguments for Bitcoin as a digital store of wealth, but then they go into NFTs and talk about scarcity.

I've seen the opposite - most crypto enthusiasts I have spoken to don't seem to understand NFTs at all / why they are considered valuable by other people. I fit into that camp.

> Overall I'm very bullish on crypto as digital gold, less so on Ethereum style apps and even less so on NFTs.

I'm quite bullish on Ethereum style "defi" apps - once we finally have decent layer 2 options and software deployed on layer 2, I think interest rates on stablecoins will be a large incentive for folks to start onboarding. The big remaining piece then is convincing people to spend their stable coins at stores - I would expect some level of "rewards" paid by the store would be sufficient. Essentially, an app that you can deposit funds into, earn interest that is well above what your bank account pays, and earns rewards that are competitive (or ideally beat) with credit cards.

[warkdarrior]

> Essentially, an app that you can deposit funds into, earn interest that is well above what your bank account pays, and earns rewards that are competitive (or ideally beat) with credit cards.

That would be fantastic! Give me 10% interest on my wallet, and 10% "cashback" for my purchases with crypto, and I'll switch my whole financial life to crypto.

[xur17]

10% cashback is probably pushing it unless the wallet is giving away "platform tokens" as a growth hack at the beginning. 2 to 3% is probably more realistic given what merchants pay credit card providers.

Long term, if merchants were smart, they'd make their own reward systems on top of this to encourage usage.

[MrMan]

Why does defi imply higher interest rates?

[bko]

You earn interest by "lending" your digital asset. People want to speculate against the asset (i.e. bet the price will go down). The only way to do that is borrow someone else's crypto (pay them an interest rate for the trouble), sell it, and eventually buy it back later at a lower price.

The interest rate is determined by the market, and since its pretty early on in defi world, the owners of the crypto demand a higher interest rate to make it worth their while. Also, the more volatile the asset the more valuable it is in terms of derivatives.

[xur17]

I'm not 100% sure of all of the reasons - I imagine some of it is defi being harder to access, some of it is the increased risk (uncertainty / it's reasonably new), some of it is removal of middlemen, and some of it is incentivized behavior as a growth hack (similar to Uber subsidizing rides). Curious for other peoples' thoughts on what drives the higher interest rates.