[adam_arthur]

I just glanced through these and don't see any explanation.

They basically just say "we put it in a vault and harvest the rewards".

What I'm asking is where do the rewards come from. What is the underlying mechanism that makes this model sustainable.

If you invest in a REIT, tenants earn money through their business and pay rents. If you invest in a BDC, the BDC makes loans to businesses and collects interest. Relationship and risks are quite clear here.

If you're Bernie Madoff you generated high yields for investors for decades by taking money from one investor to pay another, and ultimately was not sustainable and bankrupted many people. For example.

So are DeFi yields like a BDC, or like a Bernie Madoff?

[bhouston]

I think the main answer to most of these questions is that everything works well as long as BTC and most others currencies continues to rapidly increase in value as a result of a lot of cash inflows into these cryptocurrencies. This papers over all of the fraud at least for now...

When the explanation is too complex for anyone to really grasp or verify, realize that this is probably intentionally opaque in order to hide the fact that it is either hugely risky, built on a house of cards or it may be just outright fraud.

[anonymoushn]

Yeah, you'll see defi yields go a lot lower in a bear market. They were tiny for a couple months over the summer.

[SilasX]

FYI, I made a big reply that includes a response to your claim:

https://news.ycombinator.com/item?id=29501396

[anonymoushn]

Some yearn vaults invest in liquidity pools that let users pay 10bps or whatever to trade one stablecoin for another. So the yield comes from that 10bps fee.

The sUSD yVault deposits sUSD into overcollateralized lending protocols and collects interest on loans to other users (who are presumably using Aave or CREAM as places to buy leverage to get super fucking long crypto). So the yield comes from other users paying interest to borrow sUSD.