It was an interesting idea: self-repaying loans. A crypto project I had stumbled on, let’s call it “A,” suggested you could deposit an asset, borrow 50% of its current value in so-called “stablecoins” pegged to the US dollar, then forget the loan. The system would use your escrowed assets to earn interest and slowly repay your debt. Once all was repaid, you’d get back your initial deposit.
The concept was elegant. No more looming interest payments. No liquidations. And of course you had to bring assets to the table to borrow to begin with. The project would then take a small cut out of the repayments they managed for you. There was only one problem: It didn’t work.
When Project A started, yields in the space were through the roof. Your loan would repay itself within months. Then, a brutal bear market happened, and interest dropped to almost zero. No yield, no repayments—and the duration of your loan goes up, up, up. If your projected repayment time is 50 years, you may as well have lost your collateral. Or spent it on whatever you wanted to buy to begin with. As the team worked to remedy this issue, a shift in revenue occurred.
The team’s idea was to make money from the loan repayments. Instead, they ended up making money from the deposits. Ultimately, Project A worked just like a bank: You hand them money, they work with it, and whatever additional capital they generate, they’ll somehow split with you. I didn’t know the exact breakdown of which yield they chose to send where, but from their dashboards, one thing was clear: You’re not getting paid the way you had intended. Your original business model didn’t work—but you did find another in the process.
This is common in startups, of course. They pivot all the time. In this case, however, the team barely realized what was happening. At least they didn’t want to acknowledge it. I prompted them in the chat. “If you’re making all your revenue on the deposits, aren’t you more like an investment fund than a transaction intermediary?” They admitted this was a problem and claimed they still intended to make the loan part work.
This all happened years ago. Project A is still around. I just checked their stats again. Revenue from deposits outpaces that from loans by a factor of 10.
Life rarely goes to plan. That’s okay. But you do need to acknowledge the job that’s in front of you. Even if it’s not exactly the one you imagined.
Project A could have accepted their role as an investment manager a long time ago. They could have worked to formalize that relationship with their customizers. Instead, they kept playing business as usual. As a result, their marketing still presents a business whose core operating model doesn’t actually exist.
Will they ever get the loans to work? Will they run out of money? Or will they finally acknowledge the job? Time will tell us. But it has already let us know which choice we should make if we’re ever in similar shoes: You can’t change a role you don’t recognize you hold. Accept your part, then go from there.
