1. What is Pocketwo?
Pocketwo is a new home for your savings. Pocketwo offers the ability to generate high and stable interest on your cash. By depositing funds into Pocketwo, your money will immediately start generating interest.
2. How is such a high return possible?
For starters, let’s dive into what happens when you deposit money in a traditional bank.
When you deposit your money, the bank lends these funds out to people who need to borrow money–think mortgages, student loans, etc. Those borrowers pay interest fees on the loans, and a part of that interest fee is given back to you (after the banks take their cut). Because today’s interest fees are very low for borrowers, the interest rate that you end up earning is even lower–the national average savings account interest rate is 0.5%.
Pocketwo works in a similar way, but we place your money into dollar-pegged digital assets that attract borrowers who are willing to pay higher interest fees. As a result, your money is generating reliably up to 8.75% interest, leaving you with more cash in your pocket.
3. Does the yield change or fluctuate?
We are committed to keeping returns stable. We will inform you in advance if we expect any changes in the expected yield.
4. Is Pocketwo regulated?
We are not licensed by MAS.
While Pocketwo continually strives to promote user trust and security of users' funds, our business model currently does not fall under the purview of MAS's regulatory framework.
We are constantly monitoring our business model together with our legal team to ensure an up-to-date view of the regulatory environment in Singapore and appropriate compliance.
5. What are my risks?
Protocol doesn’t have enough to repay
- Overcollateralized borrowing means that there will always be surplus to repay lenders.
- To reduce the inconvenience of not being able to withdraw when you want, Anchor uses a borrow utilisation curve to increase borrow rates as utilisation gets high—the deposits will not be fully lent out, always leaving some unborrowed money to pay some lenders when they withdraw.
- Anchor has been running for about a year without any hacks.
- We may mitigate this risk by insuring funds.
- To limit this risk, we only work with protocols where:
- Code is audited (one of the main objectives of audits it to verify that rug pulls are not possible)
- Ownership expressed in their governance token is distributed among at least 100 distinct entities
- Any protocol changes must pass through a transparent public vote before being implemented
- They have successfully reached a certain size ($500 million market cap from 100+ participants).
Liquidation risks - Borrowing is undercollateralized during stressed markets
- In May 2021, this risk was stress tested when the price of LUNA (the collateral) went down sharply. Luna had managed to keep depositors money safe by paying down debt through liquidations.
- The main stablecoin we use is USDT (Tether). The other stablecoin we may also use is UST (Terra USD).
- While stablecoins generally are stable, in times of high market volatility (e.g. if a lot of one specific stablecoin is sold at the same time) there is a risk the stablecoin's peg deviates from the dollar. This means at a certain point the value of the stablecoin actually differs from $1.00 (e.g. it could be trading at $0.98).
- Stablecoins have two types of mechanisms for restoring their peg back to $1.00 in such cases. One is full reserve backing, which is used by USDT. This means that for every 1 USDT in supply, $1.00 of real USD is kept in reserve. The other mechanism is algorithmic, used by UST. With this method, 1 UST can always be purchased and sold for $1.00 worth of another specific crypto asset.
- Nonetheless, there could be times in which the value of a stablecoin we manage does not temporarily equal $1.00. We deal with this risk in three ways:
- We only use the most trusted and tested stablecoins.
- We allocate funds across a number of stablecoins to not be fully exposed to the potential instability of one stablecoin. If a withdrawal is requested and one of the stablecoins we use is not at its peg, we can still use other stablecoins to send you your funds without delay. In extreme cases we might be forced to increase the withdrawal time to 3 business days to allow more time for the peg to stabilise.
- We handle deposits and withdrawals in USDT via KuCoin. Every KuCoin user can always trade USDT to USD 1:1 inside KuCoin without fees. This means the customer will always receive the exact amount of USD that was requested.
Reduced APY risk
- We will be building a reserve to smoothen out a stable and constant APY in the unlikely event of volatility
6. How are my funds protected?
Pocketwo only deals with highly stable and over-collateralized tangible and digital assets. Pocketwo uses the most up-to-date security measures including robust end-to-end encryption, multi-factor authentication, and 24/7 security monitoring.
As detailed in your account agreements, Pocketwo is not SDIC insured and like any financial product, there is a risk that your investment may lose value. We continuously monitor our portfolio construction in order to ensure protection of your investment.
7. How often can I withdraw my funds?
You can deposit and withdraw funds at any point in time!
8. Is there a fee to deposit or withdraw?
There are no fees to deposit or withdraw from Pocketwo. Transferring funds in and out is free, forever.
9. How does Pocketwo make money?
We make money by making you money. To earn interest on your stablecoin, we connect you to secure lending partners and find the best rates available for your money. When these borrowers pay interest on the loans they're provided, we are able to pass that income back to you as a reward for saving. To continue providing this service, we take a spread on the interest earned.