Hacker News Reader

Where do the returns come from?

Does the interest return come from actual investments? Or is it paid forward by newcomers? The latter is the literal definition of a ponzi scheme.

There's no free lunch when it comes to generating interest.

It is as the other commenter said, returns come from other people borrowing collateral and paying interest on it.

It may also interest you to know that AAVE was granted an Electronic Money Institution license by the U.K. Financial Conduct Authority (https://register.fca.org.uk/s/firm?id=0010X00004U9vVAQAZ).

Borrowers pay more than lenders. You get a cut of those fees as interest. There's risk there of course, but it isn't magic money or a ponzi.

So the borrowing costs must be quite high to warrant that revenue.

Currently 18% borrow APY with 143M USDC being borrowed. You can check it here https://app.aave.com/markets