# How Poloniex Robs You of Your Compound Interest through Their Lending Section

in poloniex •  2 years ago

Poloniex has recently become notorious for being extremely user-unfriendly, greedy and backstairs, yet such reputation seems not to bother its CEO, Tristan D'Agosta (about whom very little is known, which begs its own Steemit article about it ;)). I would keep some minute fractions of bitcoin on their exchange that I would you for tests and trading. This time I decided to check what is actually meant by the interest rates they show in the lending section. Let's look at the case together.
I lent 0.03086504 BTC on 29th July at the (supposed Poloniex) rate of 2% daily for 60 days. According to standard calculations involving loans I should have earned 0.03086504*(1.02)^60 - 0.03086504 = 0.10126915 - 0.03086504 BTC = 0.07040411 BTC.
However, this is what I actually earned:

So instead of getting 0.07040411 BTC I got 0.03703814 BTC, which means 0.03336597 BTC (or around \$135) of my potential earnings were gone. In other words, Poloniex charged me 47.4% tax out of my capital gains, which is an insane rate, and far from what they claim to be charging (15%). Therefore, the actual daily interest rate was not 2%, it was only 1.323%.

So how do they determine your earnings? Well, the use the simple interest formula which does not account for time value of money. This is an actual equation that you may be looking for in this specific case: 0.03086504*(1+0.02 * 60)=0.03703814+0.03086504.

Ergo, it's not only the bad publicity around Poloniex that discourages investors from engaging in cryptocurrency transactions on their platform, it's also their attitude towards us, their customers, which makes us queasy about the exchange's future.