Pebble uses stablecoins to offer 5% yield on cash | Hacker News Reader

Pebble uses stablecoins to offer 5% yield on cash

techcrunch.com

13 pointsdonbox8 comments

So I assume this is being posted because Pebble was the company that is accused of ripping off Eco?

>“If you’re lending without collateral, there’s a huge risk, because [the borrower] is not putting down an asset,” Bai said. “Fortunately, because [Pebble’s borrowers] are putting $1,500 down, say, on a user’s $1,000 deposit, there is an asset. So even if the borrower fails to pay, we can liquidate their assets.”

Let's run the scenario shall we. I put down $1500 worth of BTC and you give me $1000 USDC. I go off and spend it on BTC. Because duh - the only reason I would want to borrow USDC is to buy crypto. Now, what scenario am I ever going to fail to pay you back? Well, the only scenario is if BTC crashes and I can't sell my BTC to pay you back your USDC. Oh no! But you're smart - you've taken collateral. But wait, you took collateral in BTC. So your collateral is perfectly correlated with the cause of default. The only case where your collateral matters is the case where it's unlikely to cover the loan.

What I find really funny about this is that it's this perfect mix of two things: The interest rates are higher than you can get from pretty much any savings account (because it's not a savings account), it's also catastrophically lower than the risk you're taking on. Like, if you really wanted to participate in this you should be asking for loanshark-like yeilds not 5%.

Generally for loans if the value of the collateral falls below the margin threshold (say 110%) then the collateral will be sold to make sure the lender has no losses. So it’s very low risk unless Bitcoin goes to zero instantly.

Additionally, because the loan is overcollateralized, the borrower can begin to unwind their leverage before they reach the margin threshold and will pay back their loan.

> But Pebble’s approach involves much less risk than people have come to associate with stablecoins, co-founder and CEO Aaron Bai explained to TechCrunch in an interview.

I really wish TechCrunch journalists would do a little more analysis of these claims instead of simply relaying the talking points of the startup’s CEOs and marketers.

“Startup offers risk-free yields higher than you can get anywhere else” should raise a lot of questions, especially when it’s involving stablecoins. Another YC company offering yields based on stablecoins (Stablegains) melted down and closed recently.

> I really wish TechCrunch journalists would do a little more analysis of these claims instead of simply relaying the talking points of the startup’s CEOs and marketers.

These are paid articles. Most of techcrunch and other hype tech news site posts are fed by PR agencies in the background.

They get an article and list of quotes to include by a PR firm which they edit a little and post.

Old but relevant "The submarine" by pg: http://www.paulgraham.com/submarine.html

Edit typo: All -> Old

Even if the article is paid for the readers expect them to do some rudimentary level of gatekeeping.

It's so risk-free that they have a clause buried in their T&Cs that states that crypto is risky and that they assume no responsibility for any losses...

I... dont think I like this positioning itself as a replacement for a traditional, consumer bank account. It's mentioned that your money is _not_ FDIC Insured, and is not subject to FDIC/SPIC protections [1][2]. Looking at /marketing it being an alternative investment avenue is one thing, but imo positioning as a consumer bank replacement that has no standard bank protections, and hardly mentions the fact that your money is being converted into crypto/investments on it's homepage [3] is sketchy at best.

1. https://www.pebble.us/service/terms CTRL+F `FDIC`

2. https://www.pebble.us/learn-articles/looking-at-fdic-insuran...

3. https://www.pebble.us/ The _only_ mention of the fact that this is investing money is a brief point towards the bottom of the page, saying "Supercharge your paycheck with full or fractional direct deposits, and reach your financial goals faster." Which still only hints (in the perspective of an average consumer) that their money is being invested and backed in crypto.

Reply on news.ycombinator.com