Why DeFi Yields for Lenders Are Low Even Though the Risk Is High

Description

If DeFi lenders are accepting 3% yields when the risk-adjusted rate should be closer to 12%, why hasn't demand pushed rates higher? Dan Robinson of Paradigm raised the question. Tom Dunleavy and Adrian Cachinero Vasiljevic work through the answer: convenience yield for onchain-native holders, censorship resistance, tax friction on offboarding, and the simple fact that DeFi's total liquidity is still a fraction of what traditional fixed income trades daily. Tom's counterpoint: the rates we see in DeFi today are not battle-tested. And when institutional capital finally arrives demanding proper risk compensation, the rates should move materially higher. Adrian adds a wrinkle: for isolated, overcollateralized Bitcoin lending, DeFi may actually be more liquid than US Treasuries, not less, which could justify a rate closer to SOFR than anyone in the debate wants to admit. Guests: → Tom Dunleavy, Head of Venture at Varys Capital - https://x.com/dunleavy89 → Adrian Cachinero Vasiljevic, Co-Founder at Steakhouse Financial - https://x.com/@adcv_ Host: → Laura Shin - https://x.com/laurashin This clip is from a longer conversation on whether DeFi lending yields adequately compensate depositors for tail risk. Full episode here: https://youtube.com/live/VOR1TNyh_vQ We go live every Monday andn Thursday — subscribe to catch it live. ______________________________________________________ Citrea Bitcoin changed how money works. Satya changes how Bitcoin scales. https://x.com/citrea.xyz/unchained Chapters: ❓ 00 Dan Robinson's pushback: if DeFi risk is mispriced, why doesn't demand fix it? ♾️ 06:58 The Credit Suisse/Archegos parallel: infinite mint hacks are not unique to DeFi ❌ 09:02 Bill Barhydt's objections: wrong risk-free base, double counting, and six weeks of panic 🤓 10:54 Tom: why $600M in one month forces you to re-underwrite your model, full stop _______________________________________________________ #bitcoin #ethereum #crypto #cryptocurrencies _______________________________________________________ Subscribe to our channel! Website → https://unchainedcrypto.com Unchained Daily Newsletter (FREE!)→ https://unchainedcrypto.beehiiv.com/subscribe/ Unchained X → https://x.com/unchained_pod Apple → https://podcasts.apple.com/us/podcast/id1123922160?ls=1 Spotify → https://open.spotify.com/show/1cJrrfGY1SKBIRn5noKSAf?si=6SI4qIcRTEO7EhOe0V9n4w RSS Feed → https://feeds.megaphone.fm/LSHML4761942757 Unchained: Your no-hype resource for all things crypto!