Table of Links Abstract and 1. Introduction Abstract and 1. Introduction Stablecoins and Lending Markets
Fixed-Rate Lending Protocols and Derivatives
Staking Derivatives
Staking Fees as Stable Interest
Stabilization Mechanisms
Some Caveats
Diversification, Interest Rates Swaps, and Tranching
Towards Universal Basic Income
Closing Remarks
Acknowledgements and References Stablecoins and Lending Markets Stablecoins and Lending Markets Fixed-Rate Lending Protocols and Derivatives Fixed-Rate Lending Protocols and Derivatives Staking Derivatives Staking Derivatives Staking Fees as Stable Interest Staking Fees as Stable Interest Stabilization Mechanisms Stabilization Mechanisms Some Caveats Some Caveats Diversification, Interest Rates Swaps, and Tranching Diversification, Interest Rates Swaps, and Tranching Towards Universal Basic Income Towards Universal Basic Income Closing Remarks Closing Remarks Acknowledgements and References Acknowledgements and References 10 Closing Remarks We have reviewed the logic of how the generation of a stable savings interest rate at as high as 20% annual rate is possible. In traditional financial investments, such a high and stable rate is above what even some of the best investors can achieve these days [62]. The key innovation here is to capitalize on the unique features of decentralized networks and lending marketplaces. In particular, ordinary savers can participate in multiple network stakings and fixed-rate saving products. It is important to recognize that this is not a technical sleight of hand. The economics behind it are straightforward. Through staking, one contributes to a process that allows highly efficient and robust financial services and products to be delivered, along with other applications [63, 64] of the blockchain system. Outside of the context of network staking, the same concept applies for liquidity pools, which allow automated decentralized markets to take place. To capture the growth of the cryptocurrency market, one can also turn these into relatively fixed-rate future incomes via interest rate swapping mechanisms, and thereby use the income to further finance stable income for the savers. In the traditional financial world, some bankers may lose part of their bonuses during economic downturns. But it rarely cuts into their base salary level, because their services are supposedly still valued. Likewise, even as the cryptomarket sees adjustments, staking fees in decentralized networks are here to stay, for staking contributions to the automation of jobs akin to those done by bankers and corporate lawyers. The very premise of decentralized finance is that everybody can participate fairly in the market mechanisms. Unlike in the traditional financial system, in decentralized finance everyone can be a ‘banker’ – even if only passively, indirectly, on a smaller scale. This is the economic basis of how we can possibly provide the household savers with meaningful basic wealth. 11 Acknowledgements We thank Sahil Dewan, Giv Parvaneh, and Boris Polania for helpful discussions and comments. HL has previously received consulting fees and research funding from Harmony. 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(1) Hakwan Lau, Center for Brain Science, Riken Institute, Japan (hakwan@gmail.com);
(2) Stephen Tse, Harmony.ONE (s@harmony.one). Authors: Authors (1) Hakwan Lau, Center for Brain Science, Riken Institute, Japan (hakwan@gmail.com); (2) Stephen Tse, Harmony.ONE (s@harmony.one). This paper is available on arxiv under CC BY-SA 4.0 DEED license. This paper is available on arxiv under CC BY-SA 4.0 DEED license. available on arxiv

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The Economics of 20% Yields: Staking, Liquidity Pools, and the Future of Saving

The Economics of 20% Yields: Staking, Liquidity Pools, and the Future of Saving

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