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Watch out for these 3 bad reasons to buy a new car

There are lots of good reasons to buy a new car. Maybe your trusty truck’s transmission died after reliably serving you for over 15 years. Maybe your car got totaled in a flood. Maybe the cost of your laundry list of needed repairs are just more than the car’s worth. All of these are decent reasons to consider buying a new car. Below, though, you’ll find 3 bad — very bad — reasons to buy a new car.

Read moreWatch out for these 3 bad reasons to buy a new car

Earn interest on USDC and DAI with new Dharma platform

The new version of decentralized lending platform, Dharma, has officially released after a 2 month open beta. Originally, the site was a peer to peer lending and borrowing platform, but they have transitioned to using a lending pool protocol for ease of use.

Dharma v2 works similarly to DyDx, but with an easy to use interface. Users simply sign up with by linking a Coinbase account, deposit USDC or DAI and then begin earning interest. 

Right now the interest rates are 7.14% APR for DAI and 5.12% for USDC. The interest earned for DAI is similar to other decentralized lending platforms and the USDC interest is significantly higher than what Coinbase offers. 

“We believe Dharma will be the product that introduces DeFi — and crypto more broadly — to millions of new users not as a vehicle for speculation”

When the beta was originally announced, Dharma had plans to allow users to borrow along with lend. Currently the site has no borrowing features and there was no mention of plans for it in the new press release. 

Dharma was included in our top three list of easy ways to earn interest with DAI and USDC, along with our analysis of risks on decentralized lending platforms.

Three easy ways to earn interest on USDC and DAI

Decentralized finance (DeFi) is a field in blockchain tech that has gained traction even throughout crypto’s price bubble. A primary reason for this is how everyone can identify with the urge to lend and borrow. There are many ways to earn interest on crypto assets, but these four polished platforms are safe (not financial advice) starting points. 

Earning interest with USDC on Coinbase

Not all blockchain tech is decentralized, especially not Coinbase and USDC. The massive spot exchange seemed to follow the “earn interest on your coins” wave after DeFi lending had been long established. Regardless of whether or not this method is for blockchain purists, people are going to use it off the strength of Coinbase’s brand.

Coinbase is the easiest place to start earning interest. All you need to do is buy some USDC with debit card or bank account and Voilà! You are now earning 1.25% APR. It’s the least you’ll earn from platforms on this list, but probably more than your bank’s savings account will give you. 

USDC is backed 1:1 by the USD and was founded by Coinbase and Circle. The two companies created what is called the CENTRE Consortium where they look for other institutions to “help change the global financial landscape.” Coinbase is able to offer interest likely because they are earning more than 1.25% with the cash that they back USDC with. 

Earn even more on Dharma 

Dharma used to be a peer-to-peer lending service which linked a lender and borrower into a contract. Recently, they decided to scrap that whole idea and become an interface for the Compound protocol.

Now, Dharma is a gateway into contributing USDC and Dai to the Compound lending pool. The change means that users can deposit and withdraw their tokens at any time. Earning interest on Dharma is as simple as purchasing DAI or USDC from a spot exchange and sending it to your Dharma address.

Right now, USDC earns 4.66% APR while DAI earns 7.39%. As the lending pool becomes more used, APR increases for lenders. As more lenders contribute or less is borrowed, interest decreases. 

Compound is a decentralized protocol and Dharma is a centralized organization that acts as a forum for users to connect with the protocol. 

Lend to margin traders

DyDx is one of the only decentralized exchanges that lets users trade with leverage. They are able to lend money to traders by using protocols similar Compound. 

Interest rates currently don’t differentiate much from Dharma. This could change throughout time since it uses the 0x protocol and along with a proprietary one. It’s also worth noting that users can earn interest by holding Ethereum, but only a measly .06% right now. 

Earning interest on DyDx might be appealing to someone who actively trades DAI/ETH pairs on decentralized exchanges. The liquidity on their DAI/ETH pair is pooled with Maker’s own Oasis exchange, so it’s not horrible compared to other DEXs. 

DyDx requires one extra step that Dharma doesn’t have. You will need a MetaMask wallet with an Eth balance. Eth is required for gas fees when withdrawing from the wallet which usually costs 10s of cents. 

So, in order to get your DAI or USDC onto DyDx there are a couple of steps: 

  1. Buy at least $5 of eth for gas. Send that to your MetaMask wallet.
  2. Buy your DAI or USDC. Send that to your MetaMask wallet. 
  3. Deposit DAI or USDC onto the exchange with the MetaMask wallet. 

Now might be the best time to lend

These platforms are in their infancy and decentralized credit ratings aren’t in existence yet. If more people learn how to lend their crypto assets, the lending pools get bigger and interest earned will decrease. 

Trading crypto is dangerous if you don’t have the time to learn, or aren’t in the position to take risk. Lending is a good way to earn interest without converting back to FIAT.

To learn more about risk on said platforms and currencies, check out our information on that here

 

How can Coinbase pay you interest and is it worth it?

Today, Coinbase announced that some U.S. holders of USD Coin will earn 1.25% APR per coin on their platform. Earning interest isn’t new in the crypto space. Plenty of other websites offer more interest for holding the same USDC, but it is a debut feature for Coinbase. 

Why am I able to earn interest on USDC? 

Circle, who created the UDSC product claims on their website that U.S. dollars backing USDC are held in reserve by regulated financial institutions. This, along with there being no records of Coinbase being in the business of lending implies that the financial institutions holding the backing for USDC are paying Coinbase higher than 1.25% interest. 

According to Coindesk, a Coinbase representative said that 1.25% interest is higher than most will receive from a savings account. 

“Speaking to the inspiration behind the USDC Rewards program, Branzburg noted that a 1.25 percent interest rate on holdings of U.S. dollars is “15 times more than the national average or what people might get through a [traditional] savings account.”

So unless those regulated financial institutions are giving Coinbase a generous savings account, the money backing USDC is likely in a CD account. According to smartasset.com, there is only one online bank offering 6 month CD rates over 1.25%. There are zero big banks offering 6 month CD rates over 1.25%. 

What this means is that the money backing up USDC is likely going to be tied up for more than six months to make paying interest profitable. 

What is the benefit of using Coinbase rather than higher paying sites? 

DYDX interest rates

Most decentralized exchanges will pay more than double what Coinbase will pay you, but moving the money around takes longer. There are no decentralized exchanges where you can convert directly to USD like you can on coinbase. 

A decentralized exchange is intended to be a forum to facilitate transactions between wallets.This can potentially make your transactions a bit slower and more time consuming. 

The only way to get USDC onto DYDX, a popular lending and borrowing platform is to use the MetaMask wallet. MetaMask app doesn’t let you deposit USDC by default, so you have to find USDC and enable it. 

From there, you deposit it into DYDX, but you will need to have some Ethereum in MetaMask to pay the gas fee. Once you would like to take the USDC out of DYDX, you need some more Eth for the gas fee. It will then be sent back to your MetaMask address, then you will pay another gas fee to transfer it to Coinbase. From there you can exchange it for fiat USD. 

On Coinbase, you will only have to purchase USDC with cash and then they will pay you interest.

To summarize 

There are many people who won’t go to the trouble of learning how a decentralized exchange or even a crypto wallet works. For those people, they are still going to earn more interest holding USDC on Coinbase than they would keeping USD in their savings account. 

As long as you can trust that the USDC product is in good hands, there doesn’t seem to be much to worry about. If something happened to where Coinbase needed to take out USDC backing and it was locked in a CD account, they would either have to dip into their personal bags or take out loans.