How Fund Managers View Lending and Staking: 3 Takeaways From a CoinDesk Research Webinar

Staking, where investors reap payments for locking up assets in functions essential to network protocols, is moving into crypto's mainstream, with large crypto exchanges offering staking services for users.

There's some irony in this, like a penny stock offering a dividend, but both lending and staking are emerging as potential factors in investment decisions for crypto investors.

In December, we invited two fund managers, both long bitcoin and other crypto assets, for a CoinDesk Research webinar on lending and staking.

Jordan Clifford of Scalar Capital and Kyle Samani of Multicoin Capital joined us to discuss how they evaluate risk and returns in crypto lending and staking, what crypto assets' risk-free rate might look like and what DeFi needs to do to attract investors and new users.

From Clifford's perspective, the technology risks are manageable; Samani said at this point the returns don't justify the risk of losing investor funds to a "Smart contract" glitch, for any allocation of assets to DeFi.Here's Clifford on how Scalar evaluates risks.

For Samani, current interest rates on DeFilending networks don't justify the risks, which include potentially having to send an email to investors explaining how the fund lost their money.

Conversation in our crypto lending webinar turned to risk-free rates in crypto and how staking might play a role in determining such a reference point for pricing risk.

Exchanges offering staking services may be able to return capital to their users more quickly than direct staking would allow.

Staking isn't free of risk by any means, Samani said, but it eliminates additional layers of risk on top of holding the asset itself.

"There's very few things that are native to the protocol and that is one of the things. My sense is, why deal with borrowing and counterparty risk when you can just rely on the protocol? You're already relying on the protocol anyways, so if you're going to rely on the protocol and add counterparty risk you should be compensated for that."