Outlet is able to generate returns by participating in alternative money markets. The money you deposit into Outlet gets exchanged into digital dollars and are put to work in these money markets. The alternative money markets allow people around the world to borrow your digital dollars and in turn, they pay you interest. Currently, the interest paid is much higher than the yield you can earn in a savings account at a bank, or in traditional money markets.

What guarantees the borrower does not run off with my money?

In order for anyone to borrow your digital dollars, the loan must be over collateralized. This means that if the borrower wants to borrow $100, then they must put up at least $120 (in many cases much more) worth of collateral. If they do not pay back the loan, then they lose their collateral. This incentivizes the borrower to pay back their loans, otherwise, they lose more money than they borrowed.

The collateral, in this case, comes in the form of digital assets, such as Ethereum. For example, if I want to borrow $100 at 8% interest, I would lock up $150 worth of Ethereum. In order to get back my collateral, I would need to pay back $108. If I choose to not pay up, then the lender keeps the $150 worth of Ethereum. On Outlet, this is immediately liquidated (sold) and converted back to digital dollars for you.

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