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1/ OKay, been studying up on the new Iron Bank from @CreamdotFinance.
Basic idea is that Cream has a ton of extra coin on hand, it would be great to lend it without requiring collateral.
How to do that?
Basic idea is that Cream has a ton of extra coin on hand, it would be great to lend it without requiring collateral.
How to do that?
2/ Answer: Lend to other highly trusted companies / protocols ONLY. B2B lending, effectively.
In the beginning: Lend only to YFi Vaults and Alpha Homera.
In the beginning: Lend only to YFi Vaults and Alpha Homera.
3/ @KyleSamani points out something VERY interesting about doing this in crypto:
The loan can ONLY be used for a specific purpose -- because smart contracts. There is simply NO WAY around this.
This allows the trust factor to go way up.
The loan can ONLY be used for a specific purpose -- because smart contracts. There is simply NO WAY around this.
This allows the trust factor to go way up.
4/ Now, the Iron Bank lends, and these protocols then turn around and lend with as much as 90x leverage to THEIR end users.
Which sounds insane.
However, Bitmex has done this sort of thing for years and remained solvent by aggressively liquidating loans at the slightest dip.
Which sounds insane.
However, Bitmex has done this sort of thing for years and remained solvent by aggressively liquidating loans at the slightest dip.
5/ So: My GUESS is that there IS a way to keep this legit and solvent.
It's just VERY high risk for the end user.
And like Bitmex, sudden cascading liquidations can have a big negative impact on the entire market.
It's just VERY high risk for the end user.
And like Bitmex, sudden cascading liquidations can have a big negative impact on the entire market.
6/ I don't like Iron Bank nearly as much as I did @AndreCronjeTech's original Yearn Vaults, which used 'claim check token inception' to make $100 act like $600 -- and collected most yield from transaction fees.
High velocity market = tons of fees = giant yield.
High velocity market = tons of fees = giant yield.
7/ On the other hand, @AndreCronjeTech has always been very careful and conservative about these things, so Iron Bank may well be more solid than I think it is right now.
I don't think it's 100% bad, but it does seem dangerous in ways the Vaults never were.
I don't think it's 100% bad, but it does seem dangerous in ways the Vaults never were.
8/ As I say, there may be stuff I'm not yet getting here that undergirds it all more powerfully than I think at this point.
I do think new financial constructions never before seen on earth are possible with crypto, so this MIGHT be a 'new thing'.
I do think new financial constructions never before seen on earth are possible with crypto, so this MIGHT be a 'new thing'.
9/ The 'coinretsu' of $YFi + Cream + Cover + Pickle etc. has never let me know down yet, and has been exceedingly brilliant at every turn -- and careful, imho -- so I expect the Iron Bank execution will reflect this.
People matter. And these are talented good people.
People matter. And these are talented good people.
10/ So, YES, I will playing around with Iron Bank and the new Yearn Vaults and Alpha Homera when it all launches. Cautiously :) But I'll be wading in for sure.
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One last addition: This was an explainer I did for how Yearn Vaults work back when they were new (just last summer!)
