There’s one digit that almost every DeFi protocol is missing badly.

Not APY.

The probability of losing money.

You open the market:

7% APY
12% APY
18% APY

Beautiful.

Now imagine that next to it is written:

7% APY — probability of a serious loss 0.5%

12% APY — 3%

18% APY — 15%

Would you still automatically choose 18%? 😅

Of course, in real DeFi no one can honestly calculate that probability with a single number.

There’s collateral, liquidity, liquidations, smart-contract risk, oracle risk, and a whole bunch of scenarios that can’t be properly squeezed into one percent.

But that’s exactly why, while studying @TermMax, I caught myself thinking something simple:

APY is measured precisely. Risk is not.

So the highest fixed APY might not be the best deal at all.

Moreover:

return is the number they show you.
Risk is the work they ask you to do.

Probably this is my main takeaway after looking into TermMax.

I don’t ask anymore:

“Where is the APY higher?”

I ask:

“What risk is the market trying to sell me for those extra percentages?”

And that’s where the choice gets much harder.

If you don’t understand where the return comes from, maybe you are the return. 👀

@TermMax #TermMax