1/5 Bitcoin does not have any interest. So, how did crypto lending platforms pay interest for BTC? 🤔
Let's walk through 🚶♂️ one more time:
2/5 1. You deposit assets into Sunshine lending 2. Moonshine hedge fund will borrow BTC from Sunshine (and deposits collateral) at SELL trading signal 3. Moonshine invests stables in Yield Farming 4. At BTC BUY signal Moonshine exits Yield farming and buys back the BTC
3/5 5. Moonshine pays back the principal and interest 6. Moonshine keeps the difference 7. Sunshine pays keeps service fee 8. Sunshine pays the depositors
4/5 That's how depositors earned yield on BTC
Sunshine was in the prime brokerage business model - it's the business model of financing and lending to hedge funds
The prime brokerage exists in TradFi. Most prominent TradFi players with advanced risk management tools run this.
👉 Did Sunshine and others have these risk management tools? 🤔
👉 How many depositors are aware about how the BTC interest was generated? 🤔
That's why DeFiThis post is based on this twitter thread.