Recently, there has been a popular "arbitrage secret" in the circle: collateralize USDC, borrow USDT, then exchange USDT for USDC and collateralize it again, repeating this process. It is said that you can earn up to 4 times the leverage interest rate difference. It sounds like a "perpetual motion machine," allowing one to extract high returns with no investment. I tried it myself, and in an ideal silent market, it mathematically holds true. However, after two rounds of operation, I started sweating—this is essentially an extreme pressure test on liquidity depth, slippage, instantaneous interest rate fluctuations, and liquidation risk. Any slight change in one of these links could cause this delicate house of cards to collapse. It resembles a precision game designed for professional quantitative teams, rather than a "get-rich-quick" scheme for ordinary people.
This experience instantly woke me up: Am I pursuing sustainable wealth growth, or am I playing a high-risk financial juggling act? The answer is obviously the former. So I stopped this 'arbitrage game' and transferred the funds back to a simpler, more robust system: the @usddio ecosystem. Here, I don’t need to rack my brains to design a path for circular collateral, nor do I have to constantly monitor the market for liquidation concerns. I just need to hold USDD and, through simple operations like staking, I can obtain clear and predictable stable returns. #USDD provides trust through stability, meaning I don’t have to trust a fragile arbitrage model, but rather trust a robust system backed by over-collateralization and transparent mechanisms. The peace of mind that the latter brings is far from comparable to that theoretical '4x rate'.
The illusion of 'circular arbitrage' versus the reality of 'stable returns'
The strategy of the '4x rate' is enticing because it paints an illusion of 'risk-free arbitrage'. But in reality, it is full of hidden costs and higher-order risks:
It is not 'risk-free', but rather 'multiple risks stacked': You need to bear the risks of collateral (USDC) price fluctuations, sudden spikes in borrowing rates, high slippage during exchanges, and the risks of the smart contracts themselves. Any misstep in any link could consume all profits and even principal.
Highly uncertain returns: The so-called '4x' is a theoretical extreme, actual returns will be significantly eroded by frequent transaction fees, slippage, and market volatility. It consumes a lot of energy and attention for uncertain small gains.
Poor scalability: This strategy has limited capacity, and once a large amount of capital flows in, the interest spread will be quickly wiped out. It cannot serve as a core value-adding strategy for large-scale assets.
In contrast, obtaining returns through USDD in the @usddio ecosystem follows an entirely different logic:
Clear risk structure: The main risks are the market risks of collateral assets (publicly verifiable) and the smart contract risks of the protocols involved (which can be avoided by choosing well-known protocols). There are no complex chain risks.
Stable and predictable returns: Although the yield may not be as high as theoretical arbitrage, it is continuous and predictable. Every penny you invest has a smooth yield curve, without the need for anxiety.
Effortless and scalable: This is a 'set it and forget it' strategy. Your time and energy are freed up to focus on life or other investment opportunities. Moreover, this model can theoretically accommodate larger amounts of capital.
From 'chasing illusions' to 'embracing systems'
Thus, my wealth strategy has completed a critical evolutionary step:
Replace 'skillful arbitrage' with 'systematic returns': I am no longer looking for the next complex arbitrage opportunity, but rather committed to allocating assets into a framework that generates stable systematic returns, such as the @usddio ecosystem. This is the approach of long-termism.
Use USDD as the core stable layer: USDD is not just a stablecoin, but also my 'pass' and 'production materials' for entering DeFi yield farms. Its own security and stability is the cornerstone of all my yield strategies.
Enhance overall risk resilience with stable returns: The stable cash flow obtained from the USDD strategy has improved my financial safety net, allowing me to face fluctuations in other areas (such as spot investments) more calmly and to avoid high-risk operations due to urgent cash needs.
The legend of the '4x rate' is a microcosm of DeFi complexity, belonging to geeks and institutions. For the vast majority of people seeking steady wealth growth, the path represented by @usddio—transparent, robust, and sustainable—is the truly reliable way to wealth. True 'wealth' is not about a clever arbitrage once, but about an asset system that allows you to sleep peacefully every night.
