Linea x Mastercard: Buying your Coffee with cTokens.
Compound is exploring Linea, and you might be able to spend in cTokens.
Linea’s new Self-Custody debt card will turn your Metamask wallet into a checking account, and a partnership with Compound means that you would be able to earn interest until the moment you spend.
The closest analogy to traditional banking would be buying coffee with T-Bills, or earning 5% on your checking account. This tool will enable users to rethink their approaches to personal finance, and depositing into Compound on Linea is an integral part of this innovation.
Let’s consider some of the implications of this partnership:
Funding your Budget with Yield
The grail of personal finance is to have enough cashflow from assets to support your annualized expenses.
Let’s suppose you brew your coffee at home, and the expense comes out to $1.5 a day, with cream. The current Supply APR for USDC on Mainnet is 11.95%. With this card, you could supply $5000 into Compound, and have that annualized expense largely subsidized by interest.
Even with variable supply rates, this is noteworthy, because this tool incentivizes users to consider annualized budget costs, and form savings plans which involve depositing into Compound.
Implications for Compound Supply Side Liquidity
On Linea, we are likely to experience an abundance of supply-side liquidity, which means that our job will be to drive demand through structured products.
This is a great position for Compound to be in, as we have been struggling with high utilization on our markets. The consequence of high utilization has been difficulty in providing stable borrow rates for large looping strategies, which makes it difficult for Compound to compete with other lenders.
There is a synergistic note here as well:
This abundance of supply for the Linea Market would create opportunities for borrowing at favorable rates. The Compound Rate Stabilization Proposal would automate equilibrium across markets, using cross-chain interest rate arbitrage.
This way, other markets will also benefit from the supply-side demand on Linea.
Integrated DeFi: Loans and LPs
COMP Everywhere has been one of the more innovative concepts to be presented on the forums, due to its ability to integrate COMP collateral into a variety of strategies which benefit the protocol as a whole.
Building COMP LP on a Linea DEX would also be a good way to use this abundance of supply-side liquidity. There are two veDEXs that are sub 7M MC on Linea. Compound DAO could build vaults which support DEX Liquidity for partners and build a locked position for the DAO. Then, users could Farm COMP LP, sell the yield, and deposit the earnings as more Supply.
Effectively turning COMP LP Yield Farming into grocery money.
Global Access to Currency Arbitrage, via self-custody wallet.
Linea will be focusing extensively on serving Latin American Countries. A self-custody debt card undercuts exchange rates and foreign banks by enabling USD Arbitrage on everyday purchases. In countries which suffer significant currency devaluation, the ability to save and purchase in USD is incredibly valuable.
As a business model, Linea and Baanx are seizing advantage over Forex, Remittances, and International Banks, and they want Compound to be a part of that success.
Security and Fraud Protection
The same Security and Fraud protections are available with this card, as with a traditional debt or credit card.
- If it gets lost or stolen, you can freeze the account.
- If someone steals your phone and uses it fraudulently, you can file a claim.
There are also additional protections, which are only available due to its focus on self-custody.
- You control what EOA is connected to the card, which means you can portion out your exposure across accounts.
- You control the delegated amount of spend, and the currency which can be spent – which means, you can restrict the card to spending $500 USDC before delegating more spending power.
Non-Crypto Native Users will have to trust themselves more now that they will be responsible for their own Private Keys. But, adoption amongst Crypto Natives is likely to be significant, because of the ease of bridging DeFi into real world expenditures.
Permissionless Rewards Programs
Linea has announced that they will be doing a cash-back program to incentivize purchases, but there is something that is more interesting – Permissionless Rewards.
Because the card is self-custody, we are likely to see integrator airdrops. Imagine a protocol wants to launch a token, and they want a low sybil way to distribute funds to active Linea users who maintain a card with an active purchase history. Those campaigns are likely to exist, and offer rewards to users.
Compound itself could even launch a rewards program using this exact tactic to pull users from Aave over to Compound.
Be your own Bank
Linea’s Self-Custody Debt Card is a step in the direction of autonomy for banking, because it can affordably merge on-chain finance with real world use cases. DeFi tends to lean risk on – but with a tool to more directly bridge on-chain balances with real world expenses, I think we might see users become more mature with their risk management.
If your bank offered you the yield of a CD, with the availability of a checking account, and the freedom to send money to whomever you want – you would take it.
That’s what Linea and Baanx are exploring with Compound.
