Luno introduces interest paying Bitcoin wallet

[gentlemand]

www.luno.com/blog/en/post/introducing-the-luno-btc-savings-wallet

Luno were bought by Barry Silbert's crew a short while back and it looks like they've tied this in with their big willy lending to traders. I still don't get how they manage a consistent return considering how useless most traders are, even the fancy ones, but there you go.

Are you tempted by 4% a year? I am not. This does state that you're opening yourself up to counterparty default and there's got to be plenty of them at some point.

[1715562345]

1715562345

[1715562345]

1715562345

[1715562345]

1715562345

[stompix]

Another one in the flood of wallets paying you interest for your coins and most of them are paying a higher rate than my banks, furthermore, the rate being in BTC.
I started asking this as a joke but seriously now, what happens if we all start parking our coins in these risk-free, no work money-making wallets? 

4% or " This means it could be less than 4% or it could be more than 4%. " to keep my coins for a year there? No! Simply no!
The last events involving bitmex and okex should be a wake-up call.

You should be aware that any funds transferred into your Savings Wallet will be lent to our chosen lending partner, in order for them to generate a return. This is how interest is earned. Your savings wallet is not a traditional fiat currency bank account, and cryptocurrency accounts are NOT covered by deposit protection insurance.

[bitbollo]

I am not too much surprised, the same return (around 4% yearly) it's also offered by a ... faucet! freebitco.in is already offering since a couple of years, without interruption.
Personally I have deposited small amount of bitcoin, but I will never send more then 10% of total portfolio.

[LeGaulois]

Better than banks offering 0.75% with unrealistic deposit insurances.

It's good to take note that the 4% p.a. rate is variable depending on performances from the lending partner (did you notice, there is no 's' to partner, it means they rely on only one) and the rate may suck during months.

*Please note that interest rates, withdrawal limits, and fees are subject to change.

So there are withdrawal limits to consider, of course, all the following conditions will change giving abcd excuse

It's also the same rate, more or less, compared to Bitwala and Blockchain.com

I am not too much surprised, the same return (around 4% yearly) it's also offered by a ... faucet! freebitco.in is already offering since a couple of years, without interruption.
Personally I have deposited small amount of bitcoin, but I will never send more then 10% of total portfolio.

Perhaps but, there is a big difference between a faucet and such a company. If you want to invest IRL, do you go to a bank or to the baker  

[gentlemand]

The last events involving bitmex and okex should be a wake-up call.

Yes, but it's also unsurprising that those two would get caught up with eventually. I guess everything DCG has much more of a whiff of legitimacy but even so this is far away from being a risk free option.

I've not kept up with similar options but they seemed to be chopping and changing rates and limits on an extremely regular basis. The mechanism underpinning the interest payments is not going to be static in the slightest. This isn't the type of thing you'll be able to leave for a year and find everything as you expected on your return.

[o_e_l_e_o]

A couple of important lines from their Terms and Conditions:

By utilising the Luno Savings Wallet, you expressly agree that any cryptocurrency deposited into your Savings Wallet may be placed with Genesis, for Genesis to lend to third parties, in order to generate a return.

Except where prohibited or limited by applicable law, you grant Luno the right, without further notice to you, to hold the cryptocurrency held in your Savings Wallet in Luno’s own name or in another name, and to lend, pledge, repledge, hypothecate, rehypothecate, or otherwise transfer or use any amount of such cryptocurrency, separately or together with other property, with all attendant rights of ownership, and for any period of time and without retaining in Luno’s possession and/or control a like amount of cryptocurrency, and to use or invest such cryptocurrency. You acknowledge that, with respect to assets used by Luno pursuant to this section: (1) you may not be able to exercise certain rights of ownership; and (2) Luno will earn a commission in connection with lending or otherwise using cryptocurrency in its business, to which you will have no entitlement.

By utilising the Savings Wallet you indemnify Luno, its operating entities or any other affiliates (including their respective directors, members, employees or agents), to the maximum extent permitted by law, against any loss, liability action, cost, claim, damages, proceedings or expense that you may suffer, directly or indirectly, in connection with the Savings Wallet, including (without limitation) the loss of cryptocurrency deposited into your Savings Account (whether in whole or in part), and you accordingly hereby waive any claim that you may have against Luno arising therefrom (including in respect of any claim for direct, indirect, consequential or pecuniary damages).

So they will take your deposits, hand them over to Genesis, Genesis will then hand them over to a bunch of unspecified third parties to trade or invest, and that should all trickle down to a target of 4% returns for you (with everyone along the way taking a cut for themselves with zero risk). That's an awful lot of intermediates and an awful lot of risk for the user for very minimal gains. If Luno go bankrupt, scam, are hacked, fail their repayments, etc., if Genesis go bankrupt, scam, are hacked, fail their repayments, etc., or the third parties go bankrupt, scam, are hacked, fail their repayments, etc., then it is your money that is gone. If the final recipients of the money make some poor trade or investments, then it is your money that is gone. And as above, if you lose everything, there is nothing you can do about it.

what happens if we all start parking our coins in these risk-free, no work money-making wallets?

Risk free? The risk is massive.

[The Sceptical Chymist]

From the luno.com link:

They say nothing in life is free. They say money doesn’t grow on trees.

They’re wrong.

Yeah, right.  That truism that "they" say has been forged into a mathematical proof ever since the beginning of money.  As Wall Streeters would put it, "There's no such thing as a fuckin' free lunch".

Are you tempted by 4% a year? I am not.

I am not either, especially not when it's 4% being promised by a bitcoin wallet that requires you to do nothing--except bear the risk of lending out whatever bitcoin you keep in the wallet, which I'm pretty sure isn't exactly risk-free.

There are PoS coins like Neblio where you can earn 10% a year by staking.  Hell, I think NEO is close to 4% and you don't even have to keep the Neon wallet running.  I'm not so sure this is as safe as its being made out to be.  No shocker there.  The more I'm in the crypto space, the less I believe in these so-called new ideas.

[stomachgrowls]

The more I'm in the crypto space, the less I believe in these so-called new ideas.

Not really some new ideas but rather do keep on copying into something if they do saw that they can go with the trend. Even if these wallets do offer 6-10% a year it isnt really something appealing
or to be considered for my Bitcoin to be parked on there.

I would rather choose on keeping it on my own wallet which would really give out the full confidence.I cant just handle out the risk when i do know that i have some coins outside
which is out of my control. 4% per year isnt really worth for the risk.

[libert19]

And its custodial wallet, would rather just stay with banks.

[pooya87]

for 4% i would rather store my coins in a business that i know has been working for a long time (the freebitco.in site) and is not called a "wallet". it makes sense for them to pay profit but it looks real shady to me that all these so called wallets claim to pay interest while have a very high risk scheme.

[TryNinja]

The are just outsourcing your money to Blockfi (Genesis). You deposit your BTC, they give it to Blockfi, take a cut and give it back to you. If you are risking your money over a third party for some interest gain, then it's much better to do it directly on the source (which you can).

4% is a bit low compared to pretty much all of their competitors. Blockfi itself offers 6% APY on BTC when used directly and Celsius ~6.2%. The risk is a bit lower (you just need to trust Blockfi, instead of Blockfi and Luno) and you earn more.

Btw, I agree lendings those coins (how they make money) is risky, but they claim to have +200% collateral for each one of them, so this minimizes the risk of the borrower losing their money while trading/whatever and not paying them back.

[gentlemand]

Btw, I agree lendings those coins (how they make money) is risky, but they claim to have +200% collateral for each one of them, so this minimizes the risk of the borrower losing their money while trading/whatever and not paying them back.

I presume they know what they're doing when it comes to this, but so does everyone else until they don't.

In recent times it's been well established operations doing it. I wonder when the amateurs get going with the same claims and little to back them up. Many crypto fans are not the most meticulous or discerning people.

[sunsilk]

It's the same as other exchanges interest accounts. But the others are paying if not in stable coin, they'll pay with their native coin which they're giving higher interest.

4% is realistic and legit profit annually but IMHO, it's best to hold it than to let them use my deposit because something worst can happen to them while holding deposits.

[o_e_l_e_o]

but they claim to have +200% collateral for each one of them

Are you sure? The only mention of collateralization on the Luno terms that I can find is as follows (emphasis mine):

Except where prohibited or limited by applicable law, you grant Luno the right, without further notice to you, to hold the cryptocurrency held in your Savings Wallet in Luno’s own name or in another name, and to lend, pledge, repledge, hypothecate, rehypothecate, or otherwise transfer or use any amount of such cryptocurrency, separately or together with other property, with all attendant rights of ownership, and for any period of time and without retaining in Luno’s possession and/or control a like amount of cryptocurrency, and to use or invest such cryptocurrency.

In terms of the Genesis terms, the only mention of 200% collateralization was on this page (https://genesistrading.com/risk-disclosures/), and was specifically referring to auction rate securities rather than lending.

Given that terms also say that if the third party does not pay back the loan your money is at risk, as opposed to saying your money will be recovered from collateral, it seems these loans are not collateralized at all.

[TryNinja]

Are you sure? The only mention of collateralization on the Luno terms

Blockfi is the one supposedly doing that. All Luno does is give your coins to them. I could be doing the same: give me your BTC, I will deposit it on my Blockfi account and take 2%.

[...] Our loan borrowers borrow USD collateralized by a minimum of 200% of the loan value. For example, a borrower taking a $50,000 USD loan would need to collateralize that loan with $100,000 worth of Bitcoin or Ether. Additionally, we have a margin system set in place which request margin calls and liquidate collateral as necessary to ensure loan performance. To date, we have had a perfect payback record. Borrowers have a strong incentive to payoff their loans and interest given the excess collateral that we hold. [...]

https://www.reddit.com/r/blockfi/comments/faondg/comment/fj16vu7

[o_e_l_e_o]

Blockfi is the one supposedly doing that. All Luno does is give your coins to them.

Luno gives your coins to Genesis Trading. Are they the same company as Blockfi? I can't find any mention on either of their websites of the other company.

As you say, BlockFi ask for 200% collateral on their loan page (https://blockfi.com/crypto-loans), although their interest account Terms of Service (https://blockfi.com/interest-account-terms) includes the exact same phrase I quoted from Luno above - "without retaining in BlockFi’s possession and/or control a like amount of cryptocurrency". However, the Genesis Trading loans page (https://genesistrading.com/lending/) makes no such statements regarding collateral.

[TryNinja]

Luno gives your coins to Genesis Trading. Are they the same company as Blockfi? I can't find any mention on either of their websites of the other company.

BlockFi is Genesis Trading. Or better, I believe you could say BlockFi is a user-friendly front for Genesis Trading. People deposit on BlockFi for 6% APY on BTC and X% for other coins and they use Genesis Trading to lend them to institutions, exchanges, hedge funds, etc...

Behind the scene, BlockFi and Luno coins go to Genesis Trading.

They don't mention the 200% because they can technically also lend without asking for any collateral, or asking for less than 200%. And they probably actually already did[1]. They are very comparable to Celsius Network, and there have been cases where they publicly disclosed that they have already lended money to big institutions worth a few bi without collateral. But they claim that's not the case for most of them. You still need to trust their word, though.

[1] https://www.coindesk.com/genesis-crypto-lending-rebounds-in-2q-firm-acknowledges-unsecured-loans

[nelson4lov]

This was just a bid by the folks at Luno to get users back to using their custodial wallets and services again. While going through Luno's terms for the savings wallet, I saw this statement:

Your crypto will be lent to a third party and is not insured or guaranteed

It makes more sense. After they give out users funds via uncollateralized loans to BlockFi/Genesis Trading, and then the funds are lost, they've no obligation to pay back their users. Funny thing is a lot of people would readily join without checking the terms. At the end of the day,  if it's not your private key, it's not your crypto.

[stompix]

what happens if we all start parking our coins in these risk-free, no work money-making wallets?

Risk free? The risk is massive.

I was ironic of course  , I did quote the part where there is basically no guarantee other than ....well,... none.

They are very comparable to Celsius Network, and there have been cases where they publicly disclosed that they have already lended money to big institutions worth a few bi without collateral. But they claim that's not the case for most of them.

I'm always amazed by the speed we're starting to see the same mistakes that have destroyed the credibility of the current system being replicated now with cryptocurrencies, and starting to think that in order to really make this economic environment viable longterm one must eliminate every trace of human decision that might go against basic rules and not just rules, common sense.
Seriously guys, every time I see this topic being bumped is one red flag after another.

But that aside, reading another topic when dozens of users were not happy just with the gains from the price increase of coins as taking those gains in fiat would mean you liquidating now and so not profit in the next jump and we're looking for passive gains, I'm starting to understand why these services are getting quite the number of clients as it's free money and (hypothetically and in the best outcome) you will keep your current holdings intact. But I still can't get rid of the feeling that there is something fundamentally wrong here, and it can't go on forever, no matter how good and bulletproof it looks on paper.

[dothebeats]

My coins are safe and cozy in my wallets, and they do get me a lot of interest by just chilling and doing nothing in there. With a lot of entities in between, what could possibly go wrong? (Hint: a shit ton.)

I may not be the greatest trader out there, nor do I ever get some handsome returns on my trading ventures but I do know that I can earn more than 4% from my bankroll in less than a year. This ploy would only work out on people that aren't really hands-on with their coins, or do not believe in their capabilities as a trader. Most of these money-making schemes done by Luno are from unsecured loans, and your funds will not be insured, greatly amplifying the risks involved by just depositing with them. This is obviously a no-go for anyone, especially if bitcoin per se is already doing the work for you.