“Really, all they are putting out there to consumers is an interest rate,” he says. The investors’ money is being used to generate higher returns than the accounts are paying out, but it is not clear how that is being done, says Professor Tan, a crypto sceptic.
“Chances are that the people doing the borrowing [of savers’ money] are likely a riskier segment to lend to,” he says.
‘Really, all they are putting out there to consumers is an interest rate.’
UNSW Professor Barney Tan
Block Earner investors can deposit Australian dollars into their account within minutes, which are then converted into USDC coins, a stablecoin pegged to the US dollar. The DeFi saving platforms then lend the stablecoins out to third-party DeFi lending and borrowing platforms that employ strategies to generate returns on the invested coins.
Block Earner uses the regularly audited DeFi lending and borrowing protocols platforms, Aave and Compound. Withdrawals can be made at any time. An exchange fee applies when funds are converted from stablecoins to US dollars and vice versa on the platform.
Charlie Karaboga, chief executive and co-founder of Block Earner, says Australians stashing cash in traditional savings accounts are seeing the value of their hard-earned money fall in comparison to the rising cost of goods and services.
“At the same time, those searching for solutions seem unable to find reliable and long-term alternatives to disappointing traditional interest rates,” he says. That’s the gap his firm is trying to close.
With Finder Earn, investors deposit Australian dollars into their Finder Wallet in the firm’s app, then convert that into TAUD stablecoins , which are pegged to the Australian dollar, one-for-one.
Angus Kidman, Finder’s editor-at-large, says being able to earn returns like this might have seemed far-fetched 12 months ago – but the world of crypto is moving fast.
However, they do have more investment- and other risks than simply stashing your money in the bank. Finder warns on its website that “if Finder Wallet, or the third party becomes insolvent, or is subject to hacking or some other cybersecurity event, your cryptocurrency may be jeopardised, and you may incur partial or total loss of your cryptocurrency.”
Deposits made at banks and other authorised deposit-taking institutions (ADIs) are guaranteed by the federal government up to $250,000 for each account holder in the event the ADI fails.
The fintechs providing DeFi savings platforms are not ADIs, and thus not covered by the guarantee.
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