Hi everyone, I'm P Sachuk. I'm co-founder and CEO of Stablewatch. We are ultimate hub for all things media and analytics for stable coins. And today I want to talk about yield risks when it comes to stable coins. But very sad to tell you that you all been racked once again uh because 10 minutes it's not enough to uh talk about everything you need to know.
But I'll try to uh make it for you. Okay. So while we talk about risk, I think it's important to remind ourselves uh what should be our comparison. So risk-f free rate in thread is uh uh is a situation where we put our money to work and expect no loss. Uh and we think of T bills and treasury bonds.
So uh US depth as such investments and at the moment they're yielding about 4.5 um% APY and any other assets would go into the other bracket. So asset with a risk premium that means that we can expect higher um revenue higher yield but we also taking in much more risk and uh we don't think that the treasury bills and treasury bonds have this risk because US always can print more money and thanks to that by its own depth. This is also why Bitcoin was created in the beginning. And that was before we thought uh that it's better to pitch Black Rockck to to buy some Bitcoin.
But it's not only digital assets um in this bracket, it's also stocks or any other investments really. And is there a risk-free rate in DeFi, especially while we utilizing our stable coins? Unfortunately, not really. So it's 2025 and still you as a D5 user can't put your money your stables to work go out there for two years and come back and feel safe mostly due to two big factors hacks and racks. So just last year we've lost 2.
2 billion uh worth of dollars of assets in defy hacks and this is around 7.5% of North Korea GDP actually. So quite a lot. Um this is happening still and whatever kind of assets uh you get exposure to T-build rappers etc you still uh exposed to this kind of risk. On the other side there are racks.
So still unfortunately there are some teams which can uh just go away with your funds uh first luring you to their protocol with high APY. So is there anything close in DeFi um and instable coins? So we call it proxy risk rate and over the years it seems that we as industry have chosen a mostly to make this comparison. So if you utilize your stables in a you will get onedigit APY on your investment and it's as safe as it can be when it comes to D5. Some other sources here of this risk-free um rate in DeFi could be also curve LPVS fees um and this would be really it over years those were two main opportunities to get risk adjusted yield with utilizing your stables but recently we see much and much more new products come to the space like tokenized T bills but unfortunately here on the economic side you're pretty safe because those are like US treasuries Right?
But still you're exposed to risk of hack. Uh some other are yield stable coins. Some of them got very vanilla mechanics and are as close to safety of a or curve but still you need to be very very careful. And then more and more thread institutions are coming on chain. So there's a lot of real world assets coming also uh letting you utilize stables in this space.
But the spectrum here is very broad as tokenized T bills are on the one side but you can also invest in car loans or some wild card lending products. Um so what are the pros uh and cons of yield burn stable coins? They're fun because they provide you more APY. At the moment they yield around 5 to 12% uh yearly which is um really great for a lot of users. But uh as you can see the table with risks is uh longer than the one on the reward side.
You still exposed to DeFi hacks. We already spoke a little bit about this. But beside just smart contract hacks, there are also risk associated with bridging because a lot of those uh funds can be flowing through different chains while you put money in such uh coins. Some other um risk are liquidations and oracle issues. And just last month I've seen three uh this type of issues within the UIBS space and I think around 3 million um worth of dollars uh was liquidated due to that.
Some other risks are misallocation risk. So whatever kind of YBS you putting your money into you will be using different strategies and it's very important to understand how your money going to be utilized. That's going to be on the next slide. And lastly, there's also a lot of examples where assets are stored offchain. But fortunately, we started working on that as industry and we try to um do the um reserve uh risk dashboards etc.
On the reward side, higher APY also higher liquidity than vanilla T bills. uh and it fully belongs to you in theory because like circle or tether can froze your funds and the same is the case for yield bank stable coins in some of those protocols but you can also find some which actually uh fully belongs to you when they are in your wallet and what are those strategies actually to get yield on top of your stable coins. So there are RWA backed ones as I said and the spectrum is very broad. There are delta neutral one and here you can think of Athena I think as the best example it works until it doesn't. It work when nobody was doing that and today even Athena is putting money into different yield sources and not actually doing arbitrage on the exchanges because it not profiting that much anymore.
Cryptobacked ones CDPs. So the first examples really in the market who provided us uh yield and here the biggest risks are bad depth and oracle issues. So we also kind of covered that. Next we see now a lot of YBS rappers those are kind of brackets um or ETFs for different yield uh other coins. So such coin can get you exposure to aa maybe to some tibial wrapper ethena and few others.
So your risk is diversified but there is then much more of a risk vectors associated with such a mechanism. Then there are a lot of exotic onchain strategies. So recently I've seen um coin which is yielding around 15% APY uh with GPU being in the loan uh within the mechanics. So there's a lot of interesting stuff here and you need to evaluate them one by one. Then manage strategy.
This is when a human is actually making actions with your portfolio. So I think it's pretty easy to think imagine what can happen uh what can go wrong. Algorithmic strategy is when bots um or just the algorithm is is doing such with your uh with your portfolio. So putting your money into different protocols etc. But maybe you know once a year AWS is going down half of the internet is not working and actually a lot of those services also are hosted on NWS and then you can have very big problem uh with uh stability of such a product.
And lastly there are trench products uh which are splitting the risk of different investments into safe part and more risky part. you can invest only in one and then you're becoming a counterparty to uh trader on the other side. Each of those got really different mechanics and different things you need to be aware of when you put in your money into into those products. So, as conclusion, there's no risk-free rate in DeFi. There's definitely a lot a lot of things to say when it comes to uh risk and where you utilize your yield stable coins.
Um it couldn't be covered in 10 minutes but uh as I said there's a way to learn much more tomorrow in this venue we do in a workshop and our head of research prepare the game uh when within one and a half hour you will be able to launch your own yield bearing stable coin on a test net pick few strategies from those we covered and understand all of the risks associated with those strategies and understand what protocols normally do if some error is happening. So, uh just a reminder, you can scan the QR code. It's tomorrow 3 p.m. Just another room, the workshop room.
And hopefully, uh it's interesting enough uh for you to to join us. That would be it. Thank you very much. Yeah. [Applause]
Automatic transcript — names and jargon may be misspelled.