In the legacy financial world, yield has dried up. Yields on U.S. Treasury bonds have never been lower. The 10-year Treasury bond now offers you a less than 0.9% return. At around 2.1%-2.3%, AAA corporate bonds aren’t doing a whole lot better.
Knowing this, while also hearing about the Federal Reserve’s strong intentions to get inflation above 2%, it’s no wonder investors are ditching low-yielding assets and getting into more speculative investments. People are allocating capital in increasingly distorted ways. How else are they going to get a return?
David Hoffman is the co-founder of Bankless, a content studio with a newsletter, podcast and YouTube channel focused on how to live a life without banks.
On Ethereum it’s difficult to avoid yield. Yield is the default incentive for successful decentralized finance (DeFi) applications to attract capital.
At the most basic level, borrowing and lending applications like Compound and Aave are offering 4.6% and 6.2% interest, respectively, on deposited USDC. More sophisticated yield aggregators like Yearn are generating 7.8% in their basic yield strategies, and up to 16% in more aggressive strategies.
Uniswap, averaging over $1 billion in trading volume per week, is putting its 0.3% trading fees into the hands of those that have supplied liquidity to the protocol. Those that have supplied ETH and