Home / The Beginning of DeFi (July 2026)

Today I saw a banner on the Robinhood homepage advertising a new 7% APY product. I was surprised to learn that it was a US-dollar stablecoin that's lent out on their Morpho blockchain, which is their layer two on top of Ethereum. I invested a little to try it out. It took ~10 seconds and was as fast and straightforward as buying a stock.

To lend out stablecoins a few years ago you had to sign up for an exchange like Coinbase, wire dollars and convert them to stablecoins, install a wallet like MetaMask and transfer the stablecoins, bridge your stablecoins to another protocol, and then connect your wallet to the lending protocol to lend out your stablecoins.

If you incorrectly typed one digit of a wallet address your stablecoins were lost forever, you had to repeat all of these steps in reverse when you wanted to sell, when tax season came it was close to impossible to know how to even begin to accurately file for what you just did, and the lending protocol was owned by a pseudonomous offshore team of cracked teenage engineers / con artists / North Korean intelligence officers, you were never quite sure.

This seems like a 10x improvement. Is this a glimpse of the crypto future we were promised 10 years ago?

This product is roughly double the APY of a high-yield savings account. Is it less than double the risk? This could have lower repayment risk than most bank loans because it's overcollateralized. Borrowers use these loans for leverage, so they lock up 1.1x-1.3x the loan value in an underlying asset like Bitcoin hoping the Bitcoin and whatever they spend the loan on will appreciate more than the fees, and if the value of the underlying asset drops below 1.1x, it's automatically liquidated.

This is probably where I should write that this is not investment advice and you should do your own research.

While there may be less repayment risk, there is real protocol risk. The stablecoins could lose their peg and/or the lending protocol could have a bug and/or get hacked, as anyone early in crypto has likely experienced. This risk is much higher than the risk of a traditional bank failure, especially given most high-yield savings accounts are FDIC insured. This product is apparently partially insured and Robinhood is putting its reputation on the line, but you're delusional if you don't assume it might all go to zero.

On the return side, blockchains offer a much larger potential market to lend out your funds. In theory, you can lend to anyone with internet access and money. They also automate the administrative overhead of making loans and cut out most of the middlemen, which means lower fees and higher returns. Not to mention you can usually unwind your position at any time. Our kids will laugh when we tell them that in our day, "the market could be closed."

Another benefit is that this product is self-custodial, which means that Robinhood can't access your funds. Self-custody is more like having your investment held in a safety deposit box that only you have the keys to as opposed to giving a bank money to do stuff with.

When you put all of this together, is the 7% return worth the cost? My guess is that it's likely close but not quite there. However, it's certainly much closer than it was just a few years ago, especially given we're in a crypto bear market, when APYs are their lowest. However, given how fast things are improving, I could see it getting there.

I have a theory that crypto quietly starts gaining real-world adoption 10-15 years after the initial hype cycle. Bitcoin hit this point around 2020-2024, when some large institutions started buying Bitcoin as an inflation hedge and the ETFs launched. Ethereum was founded in 2015 and today is the first time I've felt like we're at the beginning of widespread real-world adoption of stablecoins and decentralized financial services.