Global Coinbase users in over 70 countries can tap the competitive yields of decentralized finance (DeFi) lending on their Dai with no fees, lockups, or set-up trouble, Rhea Kaw, senior product manager at Coinbase, said in a press release emailed to PYMNTS on Thursday (Dec. 9).
DeFi enables people to borrow, lend and trade without the need for a centralized intermediary. It’s among the most widespread use cases for blockchain technology and cryptocurrencies. High yields have made lending especially popular, with an estimated $51 billion deposited into DeFi lending protocols.
Coinbase is working to make DeFi protocols seamless and affordable for its customers, with a user-friendly experience that sidesteps networks fees. People can earn DeFi on Dai, a stablecoin pegged to the U.S. dollar, Kaw said.
When Coinbase users opt in to earn DeFi yield, their Dai is deposited with the DeFi protocol Compound Finance. APY varies based on the rates from Compound Finance and updates according to market shifts. In October, the APY for supplying DAI varied from 2.83% to 5.39%.
“These higher rates reflect both the unique access to global liquidity and increased risk that can come with DeFi. Though Coinbase monitors these protocols regularly, we cannot guarantee against potential losses,” Kaw said.
Overcollateralization — holding excess assets to cover potential losses — is one way that DeFi protocols mitigate this risk.
Even when deposited with Compound, users’ Dai remains available to them for use on Coinbase to trade and spend as usual. Coinbase also covers the gas fees usually associated with accessing DeFi protocols.
“DeFi has tremendous potential to help increase economic freedom … Today’s launch is just the beginning — we are continuing to explore ways to allow our customers to use a wider variety of assets and a greater number of DeFi protocols,” Kaw said.