In this post we cover how some major crypto investing platforms have mismanaged customer funds. Then, we cover the mechanisms Burst has in place to never let that happen.
If you have been following crypto recently, you may have seen massive crypto investing platforms going bankrupt. Celsius had $25 billion under management. They’re now bankrupt. 3 Arrows Capital (3AC) had $10 billion. They’re now bankrupt. They promised safe returns and ended up losing their customers tons of money.
In this post, you will learn where they messed up & how Burst is fundamentally different.
How They Messed Up
First, these firms promised high fixed returns (~10%). When interest rates dropped, they had two choices. Lower the promised returns and let their customers know why. Or, do everything they could to achieve the high-interest rates. They chose the second. On top of that, they didn’t tell their customers anything about the change in strategy!!
They did a lot of risky things to increase returns: borrowed money, partnered with risky borrowers, and lent undercollateralized loans. All of this without ever telling their customers. All to keep promises they couldn’t actually fulfill. In addition, these firms used manipulative marketing tactics to get customers to make uneducated investing decisions. Everything was fine, until the bear market came. All of their risky decisions caught up to them. DeFi was not the central problem, it was their communication, risk management, & education of customers.
How Burst Is Fundamentally Different
That leads us to how Burst is fundamentally different:
At Burst, we value transparency over everything else.
If you want to learn how we make money, check out our FAQ. If you want to learn all of the risks that come with using Burst Secure, read this blog post. If you want to learn how saving with DeFi works, go over to this blog post. If you want to talk with our team directly or suggest app changes, join our discord.
We don’t just say we value transparency, we actually live it.
2. Risk Management
As a crypto investing platform, our top priority is keeping your money safe. So, how do we do that? 4 reasons:
First, we never borrow money to meet a promised fixed interest rate (hence why we have variable interest rates ~5%). Second, we do not lend undercollateralized loans. So, whenever we lend your money, there is always more money put down for collateral than money loaned out. If a borrower cannot repay their loan, that collateral is automatically liquidated and given back to us. Third, we only use reliable partners. All of our partners are deeply audited - check out the audits on USDC and the yearly audits on Compound. For Burst Secure, we are using DeFi protocols and partners that have historically made ~5% interest even during bear markets & crashes. Fourth, we diversify our investments. When you put your money in, it gets sent to multiple different protocols and partners. So, risk is mitigated across multiple reliable accounts.
We want you to become a smart investor. That means understanding how DeFi works & the risks that come with it. We share healthy personal finance tips on our Instagram. We also create educational resources to learn about DeFi on our Twitter, DeFi 101 site, & this blog. We want you to understand what you are investing in. In addition, we do not gamify the investing experience like other investing apps. And, we do not drive users to make emotional investing decisions through our sales tactics.
Not only do we want you to be a smart investor, we help you get there.