Right now rates are at ~0.1% and inflation at ~2% When you put your money in a savings account, banks lend it out to people for mortgages and such Banks make money on the difference between: - what they charge borrowers for loans, - and what they pay you for putting money in your savings account. This means that **if mortgage rates are low**, the interest banks can afford to give you on your savings account is near zero. Mortgages at below 3% mean that banks can give you less interest. > There is no room left for banks to pay us interest on our savings. Enter DEFI. Where you can also store your money and they will pay you interest. - FS institutions that run on code & crypto instead - Large efficiencies and savings Compound - An algorithmic, autonomous interest protocol - Traditional bank is a centralised, managed interest rate protocol - $15,500,000,000 in AUM - same as wealthfront - Business Model: - Pay interest on stored funds - Collect interest on loaned funds - It is a decentralized autonomous application - Typical spread between lenders and borrowers = 2-3% - system works because when you deposit money on Compound and stake it as collateral - Compound can automatically liquidate your collateral if you get overleveraged. - Higher returns are possible through a combination of efficiency and demand Defi Interest rates changed based on how much capital is demanded and supplied Gas fees are high but based on network congestion and irrespective of amount being sent