High yields from a DeFi bank
We are building an interest-earning stablecoin, MaxUSD.
Banks currently hold about $100T worth of deposits globally. A lot of this money is underused and earning very low rates of interest. DeFi will make this money more useful. Interest-earning stablecoins can replace bank accounts.
MaxUSD will provide benefits for customers that hold it.
It will pay a rate that is higher than the competitors, more than smoothed aUSD or cUSD.
It earns new dollars while it sits in your wallet. It is money that pays you.
MaxUSD customers can buy or redeem with USDC.
Customers can earn the underlying MaxUSD interest while they deposit it, stake it, or use it as collateral. This increases returns.
Customers can use it on chains with low fees and fast transactions. So, it’s useful for payments and as a place to keep cash that you sweep in and out of transactions.
DeFi coins like MaxUSD, Aave’s aUSDC, Terra’s Anchor, and Compound’s CASH compete with interest-earning accounts from centralized lenders like Genesis, BlockFi, and Circle. The DeFi approach is more transparent. When depositors place money with a centralized lender, they are making an unsecured loan to a company with an unknown balance sheet. The DeFi coins are more liquid. Most importantly, the DeFi approach is more profitable. Owners of a DeFi coin can double velocity and double yields by using it as collateral for other investments.
The blockchain version of a universal bank
We can pay higher yields by shopping in more places for higher risk-adjusted yields. We use the tactics of a universal bank.
In centuries past, there were universal banks that invested in a wide range of assets, and operated globally. They played a role similar to today’s venture capitalists, private equity, and hedge funds. They took risks, and they raised enough private capital to cover losses from those risks. Over time, banks became more dependent on government insurance and regulation. Now, they maintain a low level of capital, and they invest mostly in real estate loans and government securities. Banks today play in a world of low yields, and they no longer fund innovation.
Today’s DeFi lending protocols are constrained in a different way. They are very safe. They are too safe to maximize yields and profits. And, they stay safe by keeping the option to rapidly liquidate assets hosted on a single chain.
A blockchain version of a universal bank will make money by investing in a variety of asset classes. It can search for high risk-adjusted returns by allocating money to:
Differing levels of risk and leverage available on one chain
Assets on different chains
Blockchain staking rewards, a stable source of yields
Off chain assets. It should be able to buy securities and turn them into asset backed waterfalls (a “real world assets” play). It should also be able to swap into assets like treasuries if the credibility of crypto markets is threatened.
A universal bank will earn that freedom by providing enough insurance reserves to always pay back MaxUSD holders, covering losses and gaps in liquidity. For every type of asset, there will be an appropriate reserve.
Because this is DeFi, we can do some things better. A blockchain universal bank will be much more transparent than an off-chain bank, and it will have faster and more automated processes to redeem deposits.
It’s a waterfall
Many things in finance offer a waterfall of liabilities, where “senior” customers get paid first and get a safe investment, and other customers get paid last and take losses or profits. Here are three examples.
These waterfalls are similar. We can combine them to form our universal bank. The senior (top) tranche goes to MaxUSD holders, and the risky tranche is an insurance reserve controlled by our new governance coin, MaxBanker.
MaxBanker, and the cross-chain yield-earning machine
MaxBanker owners get the benefit of any additional spread that we can make over the MaxUSD interest rate. This goes into the insurance reserve. Governance coin holders can leave it there to expand the bank, use it for projects, or pay it as dividends.
Customers and contributors will help us build out the full promise of a global, cross-chain yield-earning machine.
MaxUSD customers will be able to earn MaxBanker when we release the decentralized and mutually-owned system.
Contributors will get team rewards. Contributors will get access to our gated Discord and the process where we are working with Wall Street experts and DeFi traders to build the world’s first self-driving universal bank.
We’re looking for:
DeFi and blockchain developers
Quantitative risk management. We are building Wall Street caliber risk and return models.
Contact us on Discord to get involved.
source: Global bank deposits in $Trillions, from Bank for International Settlement