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 just 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 either owned by some pseudonomous offshore team of cracked teenage engineers / con artists / North Korean intelligence officers, you weren't quite sure.

All to say, this product seems like a 10x improvement. Is this a glimpse of the crypto future we were promised 10 years ago, but without the fanfare? We're in a bear market so no one cares about crypto right now, not to mention that Robinhood doesn't even use the words crypto or Ethereum in their marketing. All they say is you can lend out your dollars as stablecoins, it's partially insured, and has xyz risks, which is about as straightforward and boring as a lot of traditional financial products out there.

This product is roughly double the APY of a high-yield savings account. Is it less than double the risk? I'm not sure but it's probably close. All loans carry repayment risk, but this could have lower repayment risk than a standard bank loan because the loans are overcollateralized (i.e. used for leverage and overcollateralized by the underlying asset with automated margin calls).

However, there is clearly higher underlying protocol risk. The stablecoins could lose their peg and/or the lending protocol could have a bug or get hacked. This risk is much higher than the risk of a traditional bank failure, especially given a lot of high-yield savings accounts are FDIC insured. This product is privately insured and Robinhood is putting its reputation on the line, but you're delusional to not assume it could 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. 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 instantly unwind your position at any time. Our kids will laugh when we tell them that once upon a time the market could be closed.

Another benefit is that this product is self-custodial, which means that Robinhood can never access your funds, despite facilitating the investment. This is hard to describe because it's a relatively nuanced concept, but this is much more like having your investment held in a safety deposit box that only you have the keys to, as opposed to giving a bank your money to manage.

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 that we are in a crypto bear market, when APYs are usually their lowest. However, if the market improves and this trajectory continues, I could see it getting there soon.

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 launched in 2016 and today is the first time I've felt like we're at the beginning of starting to see real-world adoption of stablecoins and decentralized financial services.