Unit 4 · Level 3 · Crypto Deep-Dive
Staking & yield: where returns come from
Crypto offers yield everywhere: staking, lending, liquidity providing. Before chasing ANY percentage, ask the sacred question: WHERE DOES THE YIELD COME FROM? Real sources exist: network fees, borrowers' interest, trading fees. If nobody can explain the source, the yield is probably your own deposit coming back… until it doesn't.
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What you get asked
What does staking actually do on a proof-of-stake network like Ethereum?
Rewards come from issuance and fees. Real work, real source: validators secure the chain, the protocol pays for that service. This is the 'honest yield' benchmark other offers should be compared against.
Match the yield source to its honest description
The first three have identifiable payers. The fourth pays you in a token whose supply is inflating faster than your yield. Musical chairs with extra steps.
Liquidity providing has a famous hidden cost. When the pool's tokens diverge in price, LPs suffer…
The pool formula rebalances against you as prices diverge. Fees can outweigh it, or not. LP profit = fees MINUS impermanent loss, and many LPs never do that subtraction.
Staking through an exchange adds ___ risk on top of the protocol's own risks.
Same custody lesson as League 1: the exchange stakes FOR you, holding your assets. Convenience stacked on counterparty risk. Fine, as long as you choose it knowingly.
A platform offers 45% APY on a stablecoin, source unexplained. History (Celsius, Anchor/UST) suggests…
Celsius promised sustainable yield until bankruptcy said otherwise. Sustainable yields in mature markets are single digits. Everything above needs an explanation you can repeat to Formi with a straight face. 🐜
The rest of this unit
CEX vs DEX, stablecoins, yield forensics, and narrative cycles: fluent crypto, kept skeptical.