Mark Cuban on the DeFi ecosystem, how it benefits from yield farming

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• Mark Cuban says he entered the world of decentralized finance, or DeFi, through yield farming.
• The billionaire says he’s making a 206% return on one of his DeFi investments.
• Cuban also warned that many DeFi companies would eventually go out of business.

Mark Cuban made most of his fortune by selling Broadcast.com to Yahoo! for $5.7 billion in stock near the peak of the dot-com bubble. Now the billionaire Dallas Mavericks owner says he makes money another way — through yield farming.

Cuban has become a liquidity provider on DeFi (Decentralized Finance) exchanges, where it earns rewards for allowing users to swap between tokens. The Shark Tank star said he’s seeing annual returns of over 200% from the tactic in some cases.

DeFi is an umbrella term that refers to blockchain-powered, decentralized financial applications trying to intrude into territory held by traditional financial intermediaries like banks.

Cuban has detailed his entry into DeFi in a new blog, highlighting the benefits of what he calls “a model for future tech companies and potentially all companies.”

Here are the billionaire’s top eight quotes from the blog, slightly edited and shortened for clarity.

1. “In a money exchange business or even a banking business, you need to have the financial depth to offer the range of currencies and services you need. You must be able to afford to hedge the risk of price volatility between currencies. If you want to do this business on a large scale across the world, it can be very expensive and risky. Not for DeFi exchanges. Rather than running a DeFi exchange, what makes running a DeFi exchange so much better than a traditional centralized finance operation of this and ANY kind is that as the company owners, investors and their creditors raising capital for all transactions to be conducted, Liquidity Providers (LPs) for her.”
2. “I’m a little LP [liquidity provider] for QuickSwap. I provide 2 different tokens (DAI/TITAN) which allow QuikSwap to offer swaps between these two tokens. As you can see here, this pair is one of many, and you can also see that based on the 0.25 percent volume in this swap that Quickswap pays, my return on my initial investment of $75,000 (based only on fees) as of this writing, is an annualized return of about 206%.”
3. “So in exchange for providing the liquidity that both TITAN and Quickswap need to run their trades, I get 0.25 of the transaction volume for swaps between these two tokens. As long as I continue to make a good return I will keep my money invested (volatility can cause mark-to-market losses). If not I can withdraw it immediately (some platforms have a hold period or penalties). Have enough LPs , and the stock market is far more capital efficient than a similar traditional stock market deal, and I get to make some money!”
4. “Look at Dave & Buster’s tokens. If you buy their tokens, you can only use them in their arcades. You cannot use them in others. One of the fundamental trades of DeFi is the ability to exchange the tokens of one project for those of another. That’s why they call them Exchanges. And when the exchange is decentralized, they call it a… DEX.”
5. “Every business or financial software services or applications company has cloud computing and operational costs that very often grow faster than their revenue. This is no surprise, as this is exactly why software companies are raising significant amounts of capital to “eat” their software. in the world.” Companies like Polygon have very different capital needs. Why? Because instead of building their business solely on a cloud computing platform like AWS, their businesses are decentralized. The foundation of decentralization is based on an independent party … establishing its own capital to provide computing resources to support the network platform.”
6. “In any other business, you have to plunk down a ton of money to host your own servers, or more likely pay the cloud computing costs, which can be insanely expensive for compute-intensive applications and just as expensive to scale with heavy use. Plus, you have to all of them.” Hire employees, have the investment costs to support them, etc. In the decentralized crypto world, these third parties (minors, verifiers, etc.) provide the computing power that effectively runs the platform in exchange for rewards in that network’s token.”
7. “If Polygon or any of their competitors had gone down a traditional, centralized route of business where they controlled and owned everything, they would not only have had to raise millions, but potentially many, many more, which they allocate in accordance with the tokenomics they distribute to their have defined community.”
8. “This is not to say that every crypto blockchain or DeFi project will work. You won’t. These facts are not a secret in the crypto world. There is an incredible amount of competition most will not work. They won’t get enough users or generate enough fees to be successful. Crypto is brutally competitive. But in crypto versus traditional, centralized businesses, all other things being equal, I take crypto every time.”

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